HOME DEDUCTIONS CONTROVERSY
Americans love the exemptions and loopholes in the U.S. tax code - especially the one about the home-mortgage interest deduction. This prized tax break allows taxpayers to deduct the interest they pay on mortgages of up to $1 million.
But since the subprime-mortgage bust, it's become harder and harder to justify a write-off of interest on a $1 million mortgage by a millionaire who is also getting a break on his ski house. Enter two of the chairs of the National Commission on Fiscal Responsibility and Reform, which was created by President Barack Obama: Erskine Bowles and Alan Simpson.
"The deficit and debt is like a cancer, and it's going to destroy our country from within," Bowles says.
The businessman has joined Simpson, the former Wyoming senator, in proposing to put a limit on the deduction at $500,000 and not allowing deductions for a second home.
Opposition is sure to be fierce, says Richard Guardino, executive dean of the Wilbur F. Breslin Center for Real Estate Studies at Hofstra University. "The home interest deduction is critical to Long Island because of the high housing costs," he says. "Eliminating it would depress home values and at the same time make more homes unaffordable. It would also depress the second home market on eastern Long Island."
Recent polls in the homebuilding industry show that almost 80 percent of the public wants to keep the tax break as it is. And the National Association of Realtors - which has spent more than $20 million lobbying Congress last year - warns of a 15 percent drop in home prices if the deduction is scaled back. - GIG BERMAN AHARONI
The U.S. Department of Housing and Urban Development said it will investigate complaints against 22 lenders accused of having credit score policies that unfairly denied government-insured loans to blacks and Latinos.
In complaints filed during an ongoing investigation, the National Community Reinvestment Coalition said minimum scores of up to 640 were being required by a majority of the 50 biggest lenders making loans insured by the Federal Housing Administration.
The FHA covers borrowers with a minimum score of 500 if they can put 10 percent down, while those with a minimum score of 580 can put down 3.5 percent. For borrowers with not-so-stellar credit records, FHA loans are practically the only option in today's tight credit times.
"These across-the-board restrictions have no legitimate business defense, since these loans are 100 percent guaranteed against losses except in cases where the lender fraudulently or improperly originated the loan," according to a 25-page report from the coalition, an association of 600 community organizations catering to the underserved.
The group said it asked lenders to change their policies and made complaints against only those that refused to do so. None appears to be on Long Island.
"For lenders to deny responsible home seekers this source of credit, without regard for their capacity to repay the loans, would raise serious fair housing concerns and, if proven, undermine our nation's recovery efforts," said John Trasviña, HUD assistant secretary for Fair Housing and Equal Opportunity. - ELLEN YAN