MBA Urges ‘Holistic’ Approach to Tax Reform

Citing a “once in a generation opportunity,” the Mortgage Bankers Association sent a letter this week to key policymakers on Capitol Hill and the Trump Administration, outlining ideas for comprehensive tax reform.

“We firmly believe that Congress and the administration have a ‘once-in-a-generation’ opportunity to overhaul the tax code in a manner that will spur long-term economic growth, create jobs and place more money in the pockets of hard-working Americans,” wrote MBA President and CEO David Stevens, CMB. “We believe these potential changes should be viewed holistically, and look forward to supporting you as a resource in your ongoing efforts.”

The Trump Administration has proposed sweeping overhaul of the U.S. Tax Code. The Administration’s Framework for Fixing our Broken Tax Code ( will “deliver fiscally responsible tax reform by broadening the tax base, closing loopholes, and growing the economy,” the Administration said.

In its letter, MBA noted the Framework preserves current key incentives for investing in real estate, including the mortgage interest deduction and the Low-Income Housing Tax Credit. MBA said with respect to multifamily and rental housing, maintaining the LIHTC will continue to appropriately incentivize use of private equity in development of the majority of affordable housing units for low- to moderate-income American families. In an effort to maximize the program’s effectiveness, MBA believes that statutory changes should be made as part of the reform effort to expand the amount of LIHTC credits available and offset the impact of proposed lower tax rates on the valuation of the underlying credits themselves.

MBA said it was pleased that the Framework proposes to maintain the MID, though in combination with the near doubling of the standard deduction for individuals and households–a move MBA said would provide renters and homeowners alike with additional “take home” pay.

“These proposed changes also provide policymakers with a tangible opportunity to pursue alternative homeownership tax incentives–and perhaps target those benefits more efficiently to low- to moderate-income borrowers,” the letter said. “While not mentioned specifically within the Framework, MBA also continues to support current tax law that allows homeowners to exclude a portion of the gains on the sale of a home, as we believe this provision increases velocity within the residential marketplace by suitably incentivizing the ‘move-up’ middle-class homebuyer.”

However, MBA expressed concerns over the proposal’s possibility of limiting or eliminating other critical provisions of the tax code, such as the continued deductibility of business interest and the preservation of Section 1031 like-kind exchanges for investment real estate. The letter noted an elimination or limiting of business interest deductibility would have “far-reaching and damaging impact on many industries–including real estate finance–as changes of this sort will inevitably increase the cost of financing, make debt more expensive (for all businesses), and, in turn, limit real estate activity. We strongly advocate that the provision of current law that allows businesses to deduct interest payments be preserved in its entirety.”

Additionally, MBA said it supports Section 1031 like-kind exchanges for investment real estate, and strongly believes repeal or modification of Section 1031 would have a “significant adverse impact” on commercial real estate transactions.

“The current utilization of Section 1031 provides benefits that help to promote ongoing investment patterns within local real estate markets, which, in turn, is a boon to continued economic growth,” MBA said. “Regardless of whether full and immediate expensing (or some variation thereof) becomes part of a reformed tax code, MBA will continue to support provisions that retain Section 1031 treatment for the value of investment real estate.”

MBA said any Tax Code reform legislation should carefully craft appropriate transition rules to minimize any market disruption and to avoid any changes that would disproportionately impact one group of market participants relative to others. “Our members would be quite interested in offering their perspectives on appropriate phase-ins and other treatments that would accomplish the ultimate goals of pro-growth tax reform while not causing near term market disruptions,” MBA said.

The letter went to Senate Majority Leader Mitch McConnell; House Speaker Paul Ryan, R-Wis.; Treasury Secretary Steven Mnuchin; Senate Finance Committee Chairman Orrin Hatch, R-Nev.; National Economic Council Director Gary Cohn; and House Ways and Means Committee Chairman Kevin Brady, R-Texas.