Making changes to the popular mortgage interest rate deduction would be "very bad policy," Toll Brothers CEO Doug Yearley told CNBC on Tuesday.
Industry sources told CNBC reducing the deduction is on the negotiating table as Republicans work to hammer out a tax reform package.
"It would discourage homeownership," Yearley said in an interview with "Closing Bell."
"This country has prided itself on encouraging homeownership, and mortgage interest deduction has been around for decades. It's worked very well."
The measure enables homeowners to deduct the interest paid on their home loans from their income taxes. It is currently capped at loans up to $1 million for married couples filing jointly. The cap is $500,000 for those filing separately.
While no one thinks the deduction will go away, there has been talk in Washington, D.C., about modifying it for "at least" the last 10 years, Yearley noted.
"I don't think it's going to gain traction," he said.
In May, Treasury Secretary Steven Mnuchin told CNBC that President Donald Trump's tax-reform plan would not eliminate the mortgage interest deduction. And on Monday, Senate Majority Leader Mitch McConnell said those who are worried about the deduction "can breathe easy."
— CNBC's Diana Olick contributed to this report.
WATCH: Mortgage interest deduction on the table?
