HARP Hits 2 Million, Mortgage Interest Tax Deduction Under Spotlight, And Home Ownership Trends

2 Million HARP Refinances

Government sponsored housing agencies Fannie Mae and Freddie Mac have reached a major milestone, 2 million refinances have been closed since inception of HARP (Home Affordable Refinance Program) in March of 2009.  HARP is setup to assist homeowners who are current on mortgage payments, but unable to refinance due to declining housing values.  The program has been credited with pumping millions back into the economy, as reduced mortgage payments lessen the squeeze on monthly budgets.  The ability to refinance keeps a frustrated homeowner from throwing in the towel, walking away from a property and adding another foreclosure to a saturated market.

Mortgage lenders like AmeriSave are following HARP legislation carefully in 2013.  In his 2013 State of the Union, President Obama spoke of supporting legislation changes to HARP that would open up HARP to an estimated 12 million eligible homeowners.  The bill, S. 249, was introduced by U.S. Senators Robert Menendez (D-NJ) and Barbara Boxer (D-CA) and states that under the bill borrowers would see reduced refi fees, no cost appraisals and extension of HARP for one year past its current expiration.  HARP is currently scheduled to expire on December 31, 2013.  Source: Housing Wire

Government Overstates Cost of Mortgage Interest Tax Deduction

As the federal government tries desperately to reduce the deficit in the federal budget, nearly every loophole and deduction are fair game for the chopping block.  Did you know that prior to the Tax Reform Act of 1986, interest on all personal loans (including credit cards) was deductible?  TRA86 changed that, but did keep the mortgage interest deduction to encourage more homeownership in middle-class Americans.  Homeownership has exploded since 1986, fueled by an abundance of inventory and ease of obtaining a mortgage.  In 2010, when the deduction came up for elimination, the Joint Committee on Taxation projected that the popular write-off would cost the government $137.7 billion dollars in lost tax revenue in 2013.  The good news is that the Committee recently published revised estimates that peg the figure closer to $69.7 billion for 2013.  The change in the figure is due to changes in the economy and tax legislation.  The deduction isn’t off the chopping block yet, but the revised report may have bought it some time.

Home Ownership Trends

The quintessential American Dream: Homeownership.  Since 1960’s the national rate of homeownership has remained in the 67% range.  US Census data shows that 52% of foreign-born US residents own their home, compared to 67% of native-born Americans.  At nearly 75%, owner-occupied homes are most common in suburbs and rural areas.  Just over 84% of married couples own their home, compared to 50-60% of single males and females.  Some numbers suggest that the importance of homeownership to young adults (born after 1980) has declined.  Only 39% of young adults are homeowners compared to the national rate of 65%.  Possible factors for a lack of interest in homeownership in this age group include a trend in marrying and starting a family later to the age group simply preferring the flexibility and short-term commitments involved in renting.