Mortgage Interest Deduction Safe from Trump, Adviser Says

Any plans President-elect Donald Trump may have for tax reform don't include cutting the mortgage interest deduction, according to a member of Trump's economic advisory council.

"I can tell you right now, there are no proposals from the administration to change anything on mortgage, specifically anything to do with the tax deduction for mortgage interest or anything else," Steve Calk, chairman and CEO of the $365 million-asset Federal Savings Bank in Chicago, said Thursday. "There's nothing in the plan that currently would bring that under attack."

The mortgage interest deduction, one of the largest tax breaks taken by individuals, has long been considered politically untouchable. But proposals to scale it back surface every now and then, and Trump's surprise victory has shaken assumptions about what is possible.

The recently re-elected House Speaker Paul Ryan, R-Wis., backed reform of the interest deduction in 2014. But he was one of the 10 House candidates who received the most political donations from the mortgage industry this year, and the 2016 Republican tax reform plan preserved the mortgage tax break while eliminating other deductions.

Before the election, Mortgage Bankers Association President David Stevens had suggested that his trade group might be willing to discuss cutting the mortgage interest deduction as part of a larger tax reform package. The deduction, he noted, helps middle-class borrowers more than low-income ones. He later walked back those statements.

The morning after the election, Stevens, a former Federal Housing Administration commissioner in the Obama administration, said defending the mortgage interest deduction would be a priority for his and other industry groups.

"When it comes down to MID, it'll be something that we, the Realtors, and the builders will unanimously focus on," he said. "If you're going to mess with that, you're going to mess with middle-class Americans' ability to tap into the American dream."

Calk said Thursday that he wasn't aware of any outreach by the MBA or Stevens to the economic advisory council on the issue. "He certainly hasn't discussed it with us," Calk said.

A.W. Pickel III, president of AmCap Mortgage Ltd.'s Midwest division, said he would strongly oppose cutting the mortgage interest deduction unless it were part of broader tax reductions large enough to offset the impact on home affordability.

Otherwise "I do think it would have a deleterious effect on the mortgage industry," he said, though he, too, acknowledged the deduction does less for lower-income borrowers than the middle class.

Ryan and Trump have had their differences, and although the speaker has attempted to mend fences in the wake of the election, they still aren't expected to see eye to eye.

"There's discord between Trump and the Republican establishment," said Mike Cremata, senior counsel and director of compliance at the industry vendor ClosingCorp.

Trump's tax reform plan does call for lowering consumers' taxes across the board, but it also preserves some deductions, specifically capped ones for child care and elder care.