Mortgage

One of the costliest tax deductions in the IRS code is the one that allows homeowners to deduct their mortgage interest from their income. The $477 billion in deductions taxpayers claimed last year (which includes second homes and home equity loans, and covers mortgages up to $1 million) is highly skewed to upper income households concentrated in the suburbs of a few major metropolitan areas and along the coasts.

Urbandale, Iowa
Newt Gingrich responded to a report from Bloomberg News today that he earned upward of $1.8 million in consulting fees from Freddie Mac, the quasi-public home mortgage firm. Speaking with reporters outside a restaurant in this Des Moines suburb, Gingrich said he offered the firm, which has been in conservatorship since the 2008 financial crisis, "strategic advice" over a period of eight years through his private consulting firm the Gingrich Group.

The home mortgage interest deduction costs the U.S. Treasury nearly $100 billion a year without actually doing much to encourage home ownership, most evidence suggests. Providing an impetus for home ownership in the form of a tax deduction means that most of the benefits go to taxpayers in the highest tax brackets, most of whom can afford to buy a house without subsidies, while middle-class households receive a much smaller tax break.

Fannie Mae has introduced a new policy that prevents people who have defaulted on their mortgages from getting a new Fannie Mae loan for seven years – up from five previously. This policy only applies to defaulters who have adequate income and other resources to pay the note – a process Fannie Mae calls “strategic defaulting.”