Impact 5: Tax break for homeowners at risk

"Look at the view, isn't that great? "

Patti French is in the market for a new home and counts on reaping all of the benefits of homeownership.

"For me, and I think for a lot of people, every penny counts today," French said.

One of the most popular benefits is the Mortgage Interest Deduction. It allows homeowners to take the interest they pay on their mortgage off of their taxable income.

"Oh absolutely it's a selling point. It really is very important because it encourages them that they will have some return, even the first year of ownership," REALTOR Linda Colaprete said.

The MID was created to encourage homeownership.

"The National Association of REALTORS, as well as local associations, are lobbying very hard for homeownership," Colaprete said.

It opposes any changes that would limit or undermine current law.

"There's more grumbling and growing concern about this, about what is going to happen, and hopefully our congressmen and senators will hear this and hopefully this will stay in for us," French said.

"Neither party has completely eliminated the possibility of either eliminating or reducing the mortgage interest deduction," real estate attorney Shari Olefson said.

Olefson claims it would have a hugely negative impact.

"Unfortunately, in this market, it doesn't take much to push those owners, who are considering walking away, over the edge or to convince buyers, who are sitting on the fence, to sit and wait it out a little longer," Olefson said.

Why is it at risk then? To balance the national budget. It costs the country about $100 billion in lost revenue each year.

Northwood University professor Dr. Ed Moore said that's why the idea is being tossed around.

"I think right off the bat you're going to have revenue generation."

But he said it targets one group of taxpayers.

"It's kind of a temporary fix I think. The original impact may be pretty good, but you've also got the case now of ‘I don't have that money that I just paid in taxes,'" Moore said.

"This could eventually result in more foreclosures and further price reductions. But the catch is, it's particularly dangerous for some of the hardest hit areas, like Florida, Nevada, California and Arizona," Olefson said.

Olefson said Congress will likely take this up after the election. There are also proposals to phase it out, such as limiting the Mortgage Interest Deduction to first homes, and mortgages up to $500,000, instead of the current $1 million.

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