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Home Mortgage Interest Deduction In Play

AP

The Administration isn't officially considering it, maybe not "actively" considering it, not even taking a side on it per se.

According to "staff" it was just a "musing."

At a small conclave of reporters, no cameras allowed, the Secretary of Housing and Urban Development was reportedly asked about the mortgage interest deduction, the importance of home ownership and the seeming shift of focus from owning to renting.

That last bit is huge in itself, as pretty much every President dating back to Herbert Hoover and the Home-Loan Discount Banks pushed people to own own own.

Herbert Hoover, Dec. 8, 1931

"I recommend the establishment of a system of home-loan discount banks as the necessary companion in our financial structure of the Federal Reserve Banks and our Federal Land Banks. Such action will relieve present distressing pressures against home and farm property owners."

Ronald Reagan, Jan. 25, 1984

"Tonight, we can report and be proud of one of the best recoveries in decades. Send away the handwringers and the doubting Thomases. Hope is reborn for couples dreaming of owning homes and for risktakers with vision to create tomorrow's opportunities."

Some argue that it was this push to the "ownership society" by President's Clinton and Bush that caused at least some of the housing crisis, and at the very least pushed Fannie Mae and Freddie Mac to push the envelope of responsible lending.

Secretary Donovan reportedly offered that modifying the deduction could result in deficit reduction and, as the Wall Street Journal notes, "rebalancing federal housing policy."

The mortgage interest deduction, which appears on about 41 million U.S. tax returns, is a huge political hot button, and the more questions the Secretary got, the quicker he tried to get out of the conversation. No, there is "no official position" on the deduction.

But the question didn't come from the ether.

A couple of economists from Harvard and Wharton suggested last week that the housing bubble was not caused entirely by faulty mortgage lending, but perhaps more by housing policy going back decades. Their conclusion was to focus on modifying the mortgage deduction.

According to the Congressional Joint Committee on Taxation, between 2009 and 2013, the federal government will lose roughly $600 billion from the home mortgage interest deduction.

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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