President Obama released his budget proposal this morning. A small section of the sweeping budget plan has the potential to become a major impediment to a recovery in real estate markets across the nation. NAR is 100% opposed to the provision that modifies the Mortgage Interest Deduction and is prepared to use its formidable array of resources against its enactment.

As currently drafted, the plan changes the Mortgage Interest Deduction by reducing the amount of mortgage deductibility on families earning over $250,000. This proposed change in the Mortgage Interest Deduction will result in further erosion of home prices and home values. If this proposal is enacted it will set of a new round of price depreciation, will cause greater distress on the balance sheets of banks as the collateral value of mortgage backed securities declines. A second credit crisis could emerge before the first one is resolved.

NAR has launched a multiphase plan of action to eliminate this provision from the budget plan. NAR has sent letters to President Obama, to all members of the United States House of Representatives and the Senate, and placed advertisements in the publications read by Washington, DC decision makers. Additionally, NAR has formed a coalition with other groups affected by this proposal.

Most members of Congress have also opposed the proposal. To date, limits on itemized deductions have not been part of the legislative agenda. Note, however, that in August 2009, the Congressional Budget Office (CBO) has released its annual report identifying possible revenue sources. The CBO report is NOT legislation; it is more like an academic exercise to explore options.