Washington Update - 05/01/2009 (Plain Text Version)

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Budget Resolution Omits Limits on Mortgage Interest Deduction

A controversial White House revenue-raising provision to limit deductions for mortgage interest, state and local taxes and charitable contributions for high-income earners was omitted from the annual budget resolution (S.Con.Res. 13) completed by House and Senate lawmakers this week. NAHB aggressively opposed this provision from the outset because of its potentially damaging impact on the housing industry, and many in Congress quickly declared it “dead on arrival.” The House and Senate Budget Committees inserted specific language in the budget resolution to underscore that they were not including the President’s proposals to limit tax deductions, leaving the consideration of specific revenue offsets to the tax-writing committees in the Congress.

“Unless expressly provided, this resolution does not assume any of the specific revenue offset proposals provided for in the President’s budget,” the resolution said. “Decisions about specific revenue offsets are made by the House Committee on Ways and Means and the Senate Committee on Finance, which are the tax writing committees.”

The budget includes a procedural “reconciliation” provision that would allow Senate Democrats to pass legislation on health care and education with a simple majority of 51 votes rather than the 60 that are usually required to overcome a filibuster. Democrats say they only plan to use reconciliation if bipartisan talks on these issues break down.

Both the House and Senate budget resolutions were approved largely along party lines, with four Senate Democrats, --including Arlen Specter (D-Pa.), who switched parties, and 17 House Republicans -- opposing the budget blueprint. No Republican in either chamber voted for the budget.

To gain the support of fiscally conservative blue dog House Democrats concerned about deficit reduction, House Speaker Nancy Pelosi (D-Calif.) and Majority Leader Steny Hoyer (D-Md.) pledged to enact strict pay-as-you-go, or PAYGO rules, in the consideration of four bills expected to come up later this year. The bills would extend relief from the alternative minimum tax to prevent millions of Americans from being subject to the tax, increase Medicare payments to doctors, modify the estate tax and extend expiring middle-class tax cuts. PAYGO requires all new tax cuts or spending to be offset by other spending decreases or revenue increases.

Overall, S. Con. Res. 13 would authorize an increase in the federal debt from 55% of the gross domestic product to approximately 67% of GDP in fiscal year 2014. The resolution provides for $1.086 trillion in discretionary spending for the House and Senate Appropriations Committees in fiscal year 2010, approximately $10 billion less than the White House budget proposal.

The annual budget resolution provides guidance for House and Senate lawmakers to lay out the spending priorities of Congress for the next few years. One of its primary goals is to establish the annual 302(b) allocations, which tell the House and Senate Appropriations Subcommittees how much money they are allowed to spend on government programs and departments for the next fiscal year

The budget resolution has absolutely no force of law and the President is not required to sign it. The budget process completes the first phase of annual appropriations negotiations. For more information, contact Jenna Hamilton at 1-800-368-5242, x8407.

House Panel Approves Mortgage Lending Reform Measure

The House Financial Services Committee on April 29 approved H.R. 1728, legislation designed to crack down on predatory lending. Shortly before consideration, NAHB met with several lawmakers to discuss the bill. NAHB has been tracking this bill closely, and sent a letter to lawmakers earlier this week supporting steps to ensure that mortgage lending occurs in a safe and sound manner and that abuses are properly addressed. However, NAHB informed lawmakers it is imperative that any steps taken in this effort do not inadvertently or unnecessarily disrupt the mortgage lending process or consumer financing options, or increase the costs or reduce the availability of mortgage credit.

NAHB Chairman Joe Robson delivered a similar message in March when he testified on this issue before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit. The bill is expected to go to the House floor next week and NAHB continues to monitor developments closely. A companion bill has yet to be introduced in the Senate. For more information, contact Scott Meyer at x8144. [return to top]

"Cramdown" Amendment Fails in Senate

An amendment to a broader housing and finance bill that would allow judges to modify the terms of mortgages on a primary residence failed this week in the Senate. The provision, known as "cramdown," was defeated by a vote of 45 to 51. The bankruptcy amendment would have allowed bankruptcy judges to modify mortgages on principal residences issued prior to Jan. 1, 2009, with an outstanding value of less than $729,750, by changing the interest rate, extending the term up to 40 years, and, if the home value declined, reducing the mortgage to the current fair market value. As the vote failed to secure even majority support, much less the 60 votes needed to pass it, Thursday's Senate action likely brings to a close efforts to reform the bankruptcy code. For more information, contact J.P Delmore at x8412. [return to top]