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To Get Elected In 2012 You Must Be On
The Team That Ends The Housing Crisis
The clock is ticking. We are bracing for a knockdown fight in the 2012 election. The key issue
will be the housing crisis. Someone has to fix it. Better yet, someone has to present a plan that
is feasible, and a plan that the majority of American can believe in.
There are three areas to the plan that must be presented. Number one, the mortgage interest
deduction. Number two, the increase in the down payment to 20% to buy a house. And number
three, the Federal tax incentives to buy a house.
Mortgage Interest Deduction
The mortgage interest deduction was originally designed to stimulate house purchases. It does
not work. At most, it is a tax write off for the wealthy tax payer. You have to file an itemized tax
return. Many low and moderate income Americans do not benefit from an itemized return.
Using the standardized deductions saves them more money.
Economists from the Reason Foundation, the Center for American Progress and the
Urban-Brookings Tax Policy Center all agree that the deduction is not delivering what was
promised.
In 2008 the mortgage interest deduction resulted in $470 billion in Federal taxes that were not
paid. One has to ask why only a quarter of the taxpayers used this deduction in 2009 if it is so
good? It is a bonanza for those Americans making over $200,000 a year. Seventy three
percent of these tax filers itemized their deductions in 2009 and it saved them $2,221 on
average. For those earning between $40,000 and $50,000 the savings was only $114.
You might need twenty percent down to buy a house.
The Federal government is considering asking homebuyers to put down a minimum of 20% on
a house. The Qualified Residential Mortgage (QRM) will reduce the risk to mortgage lenders.
The thinking here is that the more money the borrower has in a deal the less likely he or she
would default. This would definitely keep many potential buyers on the sidelines for quite a long
time. It could take 6 years or longer is save the down payment. If the buyer can not get an FHA
loan, then the lender will add an additional 2% or more to the rate. This is basically a penalty on
being poor.
The National Association of Home Builders (NAHB) estimates that this policy would result in
250,000 fewer home sales annually.
Americans will take a Federal Tax Incentive to buy a home, regardless of the costs.
A tax incentive program is a very expensive proposition. Someone has to pay. And it is usually
the tax payer. So what the taxpayer is actually doing is taking the money in one hand and giving
it back with the other hand.
The recent First time Homebuyer's tax credit was a limited success. It correctly focused on first
time buyers because this group usually account for 40% of residential real estate sales. The
program was able to get the housing market into first gear. However, after the tax credit
expired the housing market stalled again. Another problem with the tax credit was the amount
of fraud that took valuable dollars out of the program.
>> There were 1,295 prisoners who received $9.1 million.
>> There were 2,555 taxpayers who received $17.6 million for homes that were purchased
before the date allowed by law.
States with high foreclosure rates will be important battle grounds. Some swing states, with
foreclosure problems, such as Florida, Arizona, Nevada, Ohio and Michigan will be closely
watched.
The Team That Ends The Housing Crisis
The clock is ticking. We are bracing for a knockdown fight in the 2012 election. The key issue
will be the housing crisis. Someone has to fix it. Better yet, someone has to present a plan that
is feasible, and a plan that the majority of American can believe in.
There are three areas to the plan that must be presented. Number one, the mortgage interest
deduction. Number two, the increase in the down payment to 20% to buy a house. And number
three, the Federal tax incentives to buy a house.
Mortgage Interest Deduction
The mortgage interest deduction was originally designed to stimulate house purchases. It does
not work. At most, it is a tax write off for the wealthy tax payer. You have to file an itemized tax
return. Many low and moderate income Americans do not benefit from an itemized return.
Using the standardized deductions saves them more money.
Economists from the Reason Foundation, the Center for American Progress and the
Urban-Brookings Tax Policy Center all agree that the deduction is not delivering what was
promised.
In 2008 the mortgage interest deduction resulted in $470 billion in Federal taxes that were not
paid. One has to ask why only a quarter of the taxpayers used this deduction in 2009 if it is so
good? It is a bonanza for those Americans making over $200,000 a year. Seventy three
percent of these tax filers itemized their deductions in 2009 and it saved them $2,221 on
average. For those earning between $40,000 and $50,000 the savings was only $114.
You might need twenty percent down to buy a house.
The Federal government is considering asking homebuyers to put down a minimum of 20% on
a house. The Qualified Residential Mortgage (QRM) will reduce the risk to mortgage lenders.
The thinking here is that the more money the borrower has in a deal the less likely he or she
would default. This would definitely keep many potential buyers on the sidelines for quite a long
time. It could take 6 years or longer is save the down payment. If the buyer can not get an FHA
loan, then the lender will add an additional 2% or more to the rate. This is basically a penalty on
being poor.
The National Association of Home Builders (NAHB) estimates that this policy would result in
250,000 fewer home sales annually.
Americans will take a Federal Tax Incentive to buy a home, regardless of the costs.
A tax incentive program is a very expensive proposition. Someone has to pay. And it is usually
the tax payer. So what the taxpayer is actually doing is taking the money in one hand and giving
it back with the other hand.
The recent First time Homebuyer's tax credit was a limited success. It correctly focused on first
time buyers because this group usually account for 40% of residential real estate sales. The
program was able to get the housing market into first gear. However, after the tax credit
expired the housing market stalled again. Another problem with the tax credit was the amount
of fraud that took valuable dollars out of the program.
>> There were 1,295 prisoners who received $9.1 million.
>> There were 2,555 taxpayers who received $17.6 million for homes that were purchased
before the date allowed by law.
States with high foreclosure rates will be important battle grounds. Some swing states, with
foreclosure problems, such as Florida, Arizona, Nevada, Ohio and Michigan will be closely
watched.
