January 11th, 2013 10:07 AM by Nick Rapplean
I can remember, one pretty spring afternoon when I was about 12, walking down the street and suddenly becoming aware that a bee had flown up one of my pants legs.
It’s an impossible situation. You can’t exactly usher a honeybee to the door when there is no door. And a 12-year-old isn’t likely to throw off his pants on a city street, nor could he do so, probably, without causing the bee to sting him as was my own experience.
The current impasse over raising the nations debt ceiling and, in general, making any positive moves in Congress, has brought this moment to mind repeatedly. We’ve all got a bee buzzing angrily in our clothing and were likely to continue getting stung. After all, the opposing forces in this tragicomedy are simply and utterly opposed to one another’s wishes and beliefs. All the constant talk of whether anyone will compromise in a bipartisan manner is, in the main, wasted breath. The outcome of this problem will go primarily one way or primarily the other. But I doubt that any clear-thinking man or woman will be pleased with the outcome. We are going to get stung again.
The legislation that is famously responsible for averting our most recent tangle with a fiscal cliff was, as The Economist noted ruefully, a rather empty affair. Rather than facing an imminent debt crisis, as many European countries need to do, [America] needs to deal with the huge long-term gap between tax revenue and spending promises, particularly on health care, while not squeezing the economy too much in the short term. But its politicians now show themselves similarly addicted to kicking the can down the road at the last minute.
It must be said: This is a chance for members of the government to do the right thing, to craft the big agreement based on our economic necessities (instead of on various people’s stubborn belief systems about how government and economies work). This requires remarkable vision and clarity, and a willingness to think of the country’s future more seriously than we think about saving a particular groups backsides or increasing one political party’s power.
As it turned out, in the midst of the early January legislative actions, we had three notably good pieces of news for the real estate community. It feels, therefore, as if someone stepped away from the rancorous debate, found a quiet place to think, and worked on definite economic needs.
As a result, some fine print in the fiscal cliff legislation included several regulations that may benefit many homeowners and help their mortgage loan officers serve them more meaningfully. The provision allowing homeowners to avoid taxation of debt forgiveness for their home mortgages The Mortgage Forgiveness Debt Relief Act was extended for a year. Thus, for example, where a lender agrees to accept $110,000 in a payoff of a borrowers existing mortgage balance, but the borrower’s actual payoff amount should be $120,000, the borrower isn’t required to pay tax on the $10,000 in debt relief.
Second, private mortgage insurance will again be tax-deductible sort of a Thank-heavens-for-small-but-meaningful-favors decision that will mean a great deal to mortgage originations.
And third, the Mortgage Interest Deduction remains intact for the moment, at least. This is an extremely important tax benefit whose demise has long been predicted, since it is such an easy target (for some legislators).
Truth is, these developments speak well of the public and private support these tax benefits have received. They are evidence that calls and letters to our legislators do work, and that the real estate sector commands a good deal of respect when it speaks with one voice.