HBA Upset Over Homeowner Tax-Break Proposal

A new plan proposed by a presidential panel could mean big changes for homeowners.

Under the plan, tax breaks from owning a home could be erased.

The possibility of losing a big deduction has many worried.

Getting rid of mortgage interest deductions would have a big impact on both homeowners and the real estate market nationwide and here at home.

In northwest Arkansas, homebuilding is booming.

At the Home Builders Association, news about the proposal has them worried.

"This affects everyone with a mortgage," said President of Northwest Arkansas' Home Builder's Association Lance Johnson. "Period."

HBA officials do not see any advantage for homeowners in the plan.

"It could devastate the industry in northwest Arkansas," said Johnson.

Under the plan, mortgage interest deductions would be replaced with a 15 percent credit, but only on mortgages up to $350,000.

So, if you're paying on an "interest only mortgage" and the value of your house drops, you will likely be upside down on the mortgage.

"People struggling to buy their first home now qualify for less home than they did," said Johnson.

For homeowners like Jackie Cawood, the possibility that deductions would be eliminated has her concerned.

"Honestly, what other tax incentives are there for individuals other than their home," said Cawood. "I can't think of any."

Wednesday's proposal won't necessarily become law. The report has to be molded into legislation and then the White House has to get Congress to pass a massive tax reform package.

President George W. Bush formed the panel at the beginning of the year to try and find options to streamline the current tax code.

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.