With the tax deduction for mortgage insurance premiums paid on qualified residential interest about to expire on December 31, 2016, U.S. Mortgage Insurance (USMI) [1] President Lindsey Johnson petitioned leaders in both the House and the Senate as well as the Treasury Secretary designee, asking them to extend the tax credit for the primary purpose of assisting low- and moderate-income borrowers.
Johnson wrote three separate letters, pointing out to the lawmakers that private mortgage insurance covered more than $50 billion in claims to the GSEs during the crisis which would have otherwise been borne by taxpayers and that MI helped almost 828,000 individuals purchase or refinance a mortgage during the 12-month period ending with Q3 2016—and half of those were first-time buyers.
The deduction for mortgage insurance premiums paid on qualified residential interest is aimed at helping to make homeownership possible for low- and moderate-income borrowers who may have the sufficient credit rating but lack the resources necessary for a large downpayment.
“The deduction for mortgage insurance premiums has proven to be an important tool in lowering the cost of homeownership for the low- and moderate-income homebuyers to whom the deduction was limited,” Johnson wrote. “The provision has resulted in significant savings for families striving to afford a home.”
Johnson noted that 4.2 million tax returns filed in 2014 (he most recent year the IRS data was available) claiming the deduction for mortgage insurance premiums, and all of them were filed by low- and moderate-income taxpayers. More than 80 percent of them had incomes between $30,000 and $100,000, Johnson said.
She further noted that mortgage insurance premiums should receive equitable treatment because they are economically equivalent to mortgage interest.
“The Internal Revenue Code should retain the deduction for qualified mortgage insurance premiums, and the provision should be extended or made permanent for amounts paid or accrued beyond December 31, 2016,” Johnson wrote. “As has been noted above, in the years that the deduction has been in effect, the deduction has proven to be an important tool for making homeownership more affordable for the low- and moderate-income homebuyers to whom it was limited. Furthermore, extension of the mortgage insurance premium deduction also is supported by tax policy considerations.”
Click here [2] to view USMI’s letter to the House and Senate Committee leadership.
Click here [3] to view USMI’s letter to Treasury Secretary Designee Steven Mnuchin.
Click here [4] to view USMI’s letter to Congressional leadership.