Spring 2007 issue of Horizons

knowledge. commitment. value. CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS

With competition remaining intense and overcapacity continuing to be an issue within the industry, it is critical that mortgage lenders differentiate themselves in some manner from their competition. Business development, innovative marketing, specialized mortgage products and other service-oriented activities will remain crucial in attracting origination opportunities to the door. Although continued decreases in the origination outlook can be discouraging, several local lenders have done a good job of establishing specialized niches within the marketplace, and this differentiation will remain important for the foreseeable future.

NEW TAX DEDUCTION FOR MORTGAGE INSURANCE

Mortgage lenders should be aware that mortgage insurance will be tax deductible for borrowers in 2007. There are several important provisions, however, and they include the following:

• The tax deduction applies only to mortgages that are closed in 2007.

• At this point, it is a one-year deal. Congress would have to renew the deduction to make it applicable for the 2008 tax year and beyond. • There are income limits for the borrower. Taxpayers only get the full deduction if their adjustable gross incomes are $100,000 or less. The deduction phases out rapidly for AGIs greater than $100,000, and no mortgage insurance deduction is available if AGI exceeds $110,000.

• The deduction does not apply to loans for which the premiums are built into the interest cost of the loan. In theory, the cost of the lender-paid mortgage insurance is already deductible as interest.

• Borrowers can claim the mortgage insurance deduction only if they itemize their deductions.

• The deduction also applies to refinances, but only up to the original loan amount.

Questions? Contact:

Frank Hogg, CPA Partner-in-Charge Mortgage Bankers Services Group 314-290-3413 frank.hogg@rubinbrown.com

• If the borrower finances the entire premium by including it in the loan or prepays a year’s worth of premiums at closing, then only the amount allocated from the date of closing to the end of 2007 is deductible.

26 u summer 2007 issue