The following is an
AHGA editorial in "The Town Talk", Alexandria, LA
Hahn: Congress should make mortgage
insurance tax-deductible
By Bruce Hahn
Sunday, January 22nd, 2006
Home equity is the single greatest form of savings for most citizens. Their
home is their largest purchase and one of the few that typically increases
in value over time. For many Americans, retirement planning includes the
assumption that they will have paid off their homes and be able to live
without making payments for rent or mortgages.
Homeownership also contributes substantially to social stability. Research
shows homes are valued more in neighborhoods in which residents own a higher
percentage of homes. Homeowners are motivated to maintain their properties
so their values will increase. They stay in neighborhoods longer, and their
children do better in school. That is much of the reason that owning a home
is a key element of the American Dream.
Yet homeownership remains just beyond the grasp of millions of Americans.
One of the big challenges they face is accumulating or saving the money
needed to buy a home -- not just closing costs, but the down payment. Rather
than wait many more years to accumulate more savings, most first time
homebuyers put down 10 percent or less, financing 90 percent or more of the
balance.
In today's inflated housing market even more homebuyers are unable to make a
down payment of at least 20 percent of the purchase price and are required
by lenders to purchase mortgage insurance to protect against the risk of
mortgage default. Unlike mortgage interest payments, under current law those
mortgage insurance costs are not deductible from federal income taxes.
Homeownership would be possible for countless more Americans if mortgage
insurance costs were made tax deductible for homebuyers with incomes of
$100,000 or less. This change in the tax laws would save the average
homeowner hundreds of dollars every year and would make homeownership
possible for thousands of first time and low income buyers. There are
currently more than 10 million people using mortgage insurance in the United
States.
On behalf of the nation's 75 million homeowners, we strongly urge that
Congress make these changes, which it can do immediately as the House-Senate
conference committee is reconciling the tax legislation passed by each
chamber. The Senate included a provision to make homeowners mortgage
insurance deductible for a year on new loans. It is a good start, although
homeowners deserve this deduction to be permanent.
Making mortgage insurance payments tax deductible will boost homeownership,
particularly for prospective lower income, minority, veteran, rural, and
young homebuyers. Over the last five years, mortgage insurance and guaranty
programs covered 47% of all home purchase loans made to African American and
Hispanic borrowers and 47% to borrowers with incomes below the median income
for their area. Many of the people who use mortgage insurance are law
enforcement officers, firefighters, teachers, and veterans who live in every
community throughout the country.
In the last Congress, this popular measure almost became law. The Senate
passed the legislation, and more than 220 representatives co-sponsored it in
the House. However, the session ended before the House measure came to a
floor vote.
Congress has long recognized the importance of homeownership by allowing
homeowners to deduct the cost of mortgage interest. Without this deduction
far fewer Americans would be able to buy a home. Mortgage insurance is
similar in that it is also a cost of home financing, and those who put less
than 20 percent down can't get a mortgage without it. Now is the time for
Congress to go a step further and make mortgage insurance deductible as
well.
This legislation is sound tax policy and offers real benefits to hard
working Americans who dream of owning a home. We urge members of the House
and Senate to direct their conferees to include this measure in the
reconciled tax bill and thus make it law. Then, we can direct our energies
toward persuading Congress to make this deduction permanent.
Bruce Hahn is president and CEO of American Home-owners Grassroots Alliance,
a nonprofit consumer advocacy organization that serves the nation's 75
million homeowners.
Originally published January 22, 2006
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