The Mortgage Bankers Association was pleased the Senate version of the reconciliation bill keeps many of its priorities in place, while taking out the so-called revenge tax.
However, the bill does differ from the House of Representatives version and the two need to conform before it can go to President Trump for signature.
Furthermore, because three Republican senators — Thom Tillis, Susan Collins and Rand Paul — along with all of the Democrats voted against the package, it needed Vice President J.D. Vance to cast the tie-breaking vote.
The bond market’s early reaction to the vote was mixed. The 10-year Treasury yield closed Monday at 4.23% and opened at 4.21% on Tuesday. Just before 11 a.m. it was at 4.28%, but by 1 p.m., it retreated to 4.26%.
How the mortgage industry reacted to the Senate bill
“MBA is pleased that the Senate’s version of the bill maintains, and in several cases enhances, numerous pro-housing and economic development tax provisions that our Board-level Tax Task Force, representing both our single-family and commercial/multifamily members, advocated for,” Bob Broeksmit, president and CEO, said in a statement.
“Importantly, the bill makes permanent the mortgage interest deduction, permanently reinstates the deductibility of mortgage insurance premiums, maintains the 20% deduction for Qualified Business Income under a permanent Section 199A, makes permanent the deductibility of business interest for real property transactions, keeps current law treatment of Section 1031 like-kind exchanges and the tax code’s ‘gain on sale’ rollover provision, and raises the federal debt ceiling by $5 trillion,” he continued.
Private MI premiums were deductible from 2007 through 2021. During that period, $64.7 billion of these deductions were claimed, the U.S. Mortgage Insurers pointed out.
“Restoring and making permanent the MI premium deduction will deliver meaningful tax relief directly to low down payment homeowners and homebuyers without increasing risk in the housing finance system,” said Seth Appleton, USMI president, in a statement. “By restoring this deduction and making it permanent, Congress is standing up for American homeowners, homebuyers, and taxpayers. We encourage the House to include this deduction in the bill that is sent to President Trump to be signed into law.”
What it kept out, following lobbying by MBA, the CRE Finance Council and others, was Section 899, the so-called revenge tax and restrictions to a pass-through entity’s ability to deduct state and local tax expenses.
Why are consumer advocates upset about the Senate bill
Consumer advocates, obviously, were disappointed.
“Today, the Senate majority rammed through legislation that gives tax breaks to billionaires, cuts programs people rely on to meet their families’ crucial needs, and guts agencies, like the Consumer Financial Protection Bureau, that protect people from abusive corporate practices,” said Ericka Taylor, co-executive director of Americans for Financial Reform, in a statement.
“Paying for tax breaks for the ultra-wealthy with savage cuts to nutrition, healthcare, and other programs is the most regressive giveaway to Wall Street tycoons that Congress has ever considered,” she said.
The bill cuts the CFPB budget by 70% or more, said a statement from the National Consumer Law Center.
“The Senate’s bill will drastically slash the Consumer Financial Protection Bureau, ending its critical work to protect ordinary people across the country,” said Lauren Saunders, NCLC associate director. “There is nothing ‘beautiful’ about allowing big banks, fintechs, and other financial service providers to break the law and exploit consumers — including servicemembers, veterans, and their families.”
Somewhat quixotically, AFR’s Taylor asked the House to “stand up for the people and reject the one big, brutal bill, a legislative monstrosity that fuels financial abuse and racial and economic inequality.”
Do deficit-hawks support the Senate measure?
An organization of deficit-hawks, the Committee for a Responsible Federal Budget, said the tax cuts in the bill would add over $4 trillion to the national debt through 2034. This is $1 trillion more than the House bill.
“The Senate took a bill that already borrowed way too much, and took it from bad to worse,” a statement from Maya MacGuineas, its president, said. “The Senate expanded the House’s tax breaks, watered down its offsets, introduced new special interest giveaways, and added another trillion dollars onto the price tag.”
The Committee said the Senate bill did not comply with House instructions which require $2 trillion of spending cuts to unlock $4.5 trillion of tax reductions, missing the mark by $600 billion.
Albeit for different reasons, the group agreed with the consumer advocates that the House should reject the Senate measure.
“Instead of worrying about arbitrary deadlines or sparing the Senate another vote-a-rama, fiscal conservatives should stand up for what’s right and reject the Senate plan to explode our debt,” MacGuineas said.
