Mortgage Industry Unharmed From Fiscal Cliff Deal

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capital Mortgage Industry Unharmed From Fiscal Cliff Deal After months of uncertainty surrounding the fiscal cliff, a deal has finally been made that will go without harming the housing industry. The just released deal will provide extensions to both the Mortgage Forgiveness Debt Relief Act and the Mortgage Interest Deduction.

According to Kerri Ann Panchuk of HousingWire, the law for mortgage insurance premiums originally expired at the end of 2011, but the American Taxpayer Relief Act of 2012 has now extended the law, which will apply for fiscal years 2012 and 2013.

In addition, the Mortgage Forgiveness Debt Relief Act was originally passed in 2007 and continued through the end of 2012, but will now be in effect until the first of 2014.

Lender411 states that eligible borrowers with an adjusted gross income of less than $100,000 per year will be able to deduct 100 percent of annual mortgage insurance premiums with itemized federal tax returns while borrowers with an AGI above $100,000 will have benefits that are subject to a sliding scale.

The tax break will provide aid for those with insurance from the FHA, VA, Rural Housing Service, or private insurance plans.  In order for borrowers to qualify for the aid, any debt accumulated must have been used to buy, build, or improve a principal place of residence and be secured by that residence.

Although some believed that mortgage rates would rise due to renewed stock market confidence after a deal was made regarding the fiscal cliff, mortgage rates have not changed significantly in the past week.

Polyana da Costa at Bankrate points out that in a normal market, rates rise when stocks do well, but due to mortgage bonds being purchased by the Fed every month, the current market is not normal.

There is still some uncertainty as to whether the mortgage interest tax deduction will become a long-term part of the deficit reduction plan, but for now, extensions on both of the bills will provide continued stabilization to the recovery of the housing market.

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