MBA Opposes President Obama's New Federal Budget Plan; Includes Reduction of Mortgage Interest Deductions for High Income Earners
(WASHINGTON, DC) -- The Mortgage Bankers Association (MBA) is not happy with the new 2011 fiscal-year federal budget proposed Monday by the Obama Administration.
In a prepared statement just issued, MBA's Chairman Robert E. Story, Jr. states, "Reducing the federal deficit is vital to the long-term health of the US economy and our industry. However, we believe it can and should be done without negatively impacting the already-fragile housing market."
Story further commented, "Limiting the mortgage interest deduction and imposing additional taxes on lenders will only make economic recovery more difficult."
MBA opposes the proposal to reduce itemized deductions, including the deduction of mortgage interest, for taxpayers reporting income above $250,000 (joint) $200,000 (single). This would have a negative impact on the housing market, particularly in high cost states like California and New York, as it would increase the cost of mortgages for many potential homeowners, especially those in high-cost states.
MBA also opposes the proposal to tax carried interest at ordinary tax rates (as opposed to the capital gains rate, as it is taxed now), as it would discourage capital formation for lending.
MBA believes the Financial Crisis Responsibility Fee will reduce the availability and increase the costs of real estate loans to consumers and small businesses by discouraging large financial institutions from entering into new, private label commercial mortgage backed securities (CMBS) and residential mortgage backed securities (RMBS) transactions and significantly reducing the profitability of non-agency servicing.
Story also noted that the budget did not offer any indications of the Administration's plans for the future of Fannie Mae and Freddie Mac.
"MBA has been at the forefront of the debate over the future of the government's role in the secondary mortgage market," said Story. "We rolled out our proposal in September and have been meeting with all stakeholders on Capitol Hill, within the administration, and across the industry to share our perspectives. Our proposal would provide a new foundation for supporting the core of the mortgage market. We look forward to continuing our discussions as the administration readies its suggestions."
MBA has supported the administration's efforts to improve risk management of the Federal Housing Administration's (FHA), and thus strongly supports the additional $18 million budgeted to allow FHA to implement its improved risk management systems. MBA also supports the $20 million budgeted to combat predatory lending and mortgage fraud at HUD, as well as additional funding for housing counseling and foreclosure avoidance.
"We are pleased to see increased funding for several critical programs at FHA," added Story. "We support both the efforts to help FHA better manage its risk. We also support additional funding at HUD and the Department of Justice to combat mortgage fraud. I also want to add how pleased I am to see that FHA's multifamily programs are continuing to show strong performance in the face of the current challenges in the housing market."
MBA also found troublesome the following additional provisions in the budget proposal:
- Termination of program authority to allow expensing (for tax purposes) of real estate environmental remediation, or "brownfields" clean up costs.
- Reduced federal support for terrorism risk insurance programs (TRIA).