Home ownership issues weigh big in September Senate

Billings Gazette

by Tom Lutey

The American dream of home ownership will be front and center when the U.S. Senate returns from its August break, U.S. Sen. Jon Tester said Wednesday.

From tax reform to the winding down of Fannie Mae and Freddie Mac, lawmakers will be looking at issues that affect home ownership. Montana’s senators have key roles to play on both issues.

On tax reform, U.S. Sen. Max Baucus, D-Mont., has asked lawmakers to take a “clean slate” approach to tax breaks, meaning that for the sake of discussion, the Senate Finance Committee he chairs has zeroed out all federal tax breaks and asked senators to submit arguments in favor of breaks they want added back in. Tester told The Gazette editorial board that he will support preserving some form of tax deduction for mortgage interest.

“The interest rate deduction on homes, I think, is something that is very, very important,” Tester said. “Whether there is an interest deduction on second homes or not, that’s debatable, but on a first home, absolutely I think that should be kept in code.”

Tester said he will also throw support behind keeping tax breaks that create jobs or motivate economic growth, but he will take a close look at each one before choosing which he will support.

After returning from break, Tester and other members of the Senate Banking Committee will seek support for winding down U.S.-owned mortgage financiers Fannie Mae and Freddie Mac. In the simplest of terms, Fannie Mae, the Federal National Mortgage Association, and and Freddie Mac, the Federal Home Loan Mortgage Corporation, have for decades been the backstop for U.S. housing market, guaranteeing and purchasing loans from mortgage lenders.

The two companies, operating as government-sponsored enterprises, were originally created in the Great Depression to rescue banks.

Mortgages bought by Fannie and Freddie during the housing crisis turned out to be toxic, saddling the companies with trillions of dollars in debt.

The two companies were seized by federal regulators in 2008. Lawmakers would like to replace the two entities with a government-funded insurer.

Tester is co-sponsoring the Housing Finance Reform and Taxpayer Protection Act. Instead of Fannie and Freddie guaranteeing home loans, a new, single entity would preserve the 30-year fixed rate mortgage, while protecting taxpayers from the burden of debt associated with failed mortgages.