Tax reform

The Senate tax proposal released Thursday would cap the mortgage interest deduction for properties worth $1 million, a reversal from the House plan that would have limited the deduction to $500,000.

Here's a look at the 12 housing markets with the largest percentages of mortgages over $500,000 — the new threshold House Republicans have proposed for the mortgage interest deduction in their tax plan.

Bank lobbyists are increasingly worried that the Senate Republicans may go further than the House in taxing large financial institutions as part of their reform push.

A House Republican tax proposal that infuriated housing groups and sent homebuilder stocks sliding would only have a modest impact on the market for new homes and could end up being a net positive for the industry, according to Keefe, Bruyette & Woods analysts.

CUNA and NAFCU cautioned, however, that the bill is by no means final and could still change.

Top banking executives called the Republican tax plan an important first step toward tax reform and economic stimulus, but questions immediately arose about whether trade-offs and complexities in the bill would undercut it.

Hopes that tax reform might soften a weakening of the mortgage interest deduction were quickly dashed as the GOP plan landed a double punch on the incentive cherished by the mortgage and housing industries.

But the home mortgage deduction for existing mortgages would be preserved, according to a two-page outline of the House GOP tax reform bill. Meanwhile, homebuilder stocks initially plunged.

It's been a decent year for banks, especially given the industry's return on assets hit a 10-year high. But there are signs it might not last. With Halloween near, here is a look at some potentially frightening developments that could keep bankers up at night.

While credit unions may have dodged a bullet on taxation, some in the housing industry expressed concern that the plan would double the standard deduction to $24,000 for married couples and $12,000 for individuals—a move that could dramatically lessen the impact of the mortgage interest write-off.