National Association of Home Builders CEO Jerry Howard told CNBC on Friday he's much more optimistic about the Republican's tax overhaul after a meeting with key lawmakers.
Howard said last month his members were "irate" about a proposed plan in the House bill to slice the mortgage interest deduction in half, to a maximum of $500,000. He said it could lead to a housing recession.
The NAHB has asked that the bill maintain a cap on mortgage interest deduction at $1 million but expand the deduction to include home equity loans for capital improvements to residences among other demands. The Senate bill would not change the mortgage interest deduction. If the Senate passes its version, conferees would have to reconcile their two.
"We've had some very interesting and positive discussions with the speaker and Chairman Brady, and we know that they are very aware of the potential impacts on housing," said Howard, referring to meetings Thursday with House Speaker Paul Ryan and House Ways and Means Chairman Kevin Brady. "And they're interested in our ideas on how to correct some of those."
"I'm not saying we're in support of the bill yet, but we're in a much better place than we have been," Howard told "Squawk Box." "They're very interested in our ideas."
Senate Republicans delayed a vote on their tax bill as some fiscal conservatives worried about the bill's impact on the federal deficit. Senators will rework the legislation and a final vote could come Friday. The House passed its version on Nov. 16.
When asked whether lawmakers would make changes late in the legislative process, Howard said: "We think the mere strength and importance of the housing sector through the economy warrant considering it."
"We understand the pressures that they're under," added Howard, a former National Association of Realtors legislative analyst. "But they understand that the last time house values went down by that much, there was a national, long-term recession. Nobody wants that."
—CNBC's Tucker Higgins contributed to this report.