Besides the mortgage interest deduction, the budget proposal could also have other important implications for mortgage finance.
Will FHA Draw From Treasury?
The budget will likely provide an updated estimate on the Federal Housing Administration's financial health. The agency said late last year that it is likely to have a $16.3 billion shortfall in its reserve fund and that it may have to request the Treasury for funds for the first time in its history.
The recovering housing market may have reduced the projected shortfall, but only marginally.
The FHA has been hiking its premiums and tightening lending standards to reduce the projected shortfall, but there is now a bipartisan effort to overhaul the agency, which some say is only one recession away from a bailout. The FHA has up to Sept. 30 to determine if it needs to draw funds from the Treasury.The government's refinance and mortgage modification programs are due to expire at the end of 2013. The refinancing program has received a lift in the past year after changes announced in late 2011, while the modification program is still short of the Administration's targets. Still, with more than 10 million homeowners still underwater, the government is under pressure to continue its mortgage aid. Any proposal to extend the programs will be welcome news for both borrowers and will also benefit banks such as Wells Fargo (WFC - Get Report), JPMorgan Chase (JPM - Get Report) and Bank of America (BAC - Get Report) that have big mortgage businesses.