From the LA Times:
Tops on the CBO's hit list for housing: Slash deductions for homeowner mortgage interest from the present $1.1-million limit to $500,000, phased in with $100,000 annual reductions starting in 2013.
Taxpayers now can write off mortgage interest on their principal home debt up to $1 million and on home equity debt up to $100,000. Under the CBO's option, that maximum mortgage debt amount would shrink yearly until it hit $500,000. Over a 10-year period, this change would boost tax collections by an estimated $41 billion.
The CBO offered up a second option if Congress wants to raise a lot more money: Replace the mortgage interest deduction with a flat 15% tax credit for everybody with mortgage amounts below the declining limits in the first option. Rather than taking write-offs tied to income tax bracket, every homeowner would get a credit worth 15% of mortgage interest paid.
This would be effective wage deflation for many. The NAR will definitely gunning full bore for mortgage interest deductions to be left alone. I am thinking this might be more of a political move to try and pass the "compromise" of maxing out the deduction at 28% as has been suggested in a few different places. For high cost areas like California the deduction is a much bigger part of "affordability" than lower cost, lower wage areas of the country.