Homebuilders are scrambling on Thursday afternoon.

Republican lawmakers unveiled their new tax plan Thursday, which proposes a cap on the mortgage-interest deduction at $500,000.

Although the proposed deduction wouldn't apply to existing mortgages, homebuilder stocks took a hit in early afternoon trading as investors became concerned mortgage deduction woes would impact homeowners' demand. 

PulteGroup Inc. (PHM - Get Report) shares were lower 0.07% to $30.39, D.R. Horton Inc. (DHI - Get Report) stock fell 0.04% to $44.71 and KB Home (KBH - Get Report) shares slipped 1.49% to $27.13. Toll Brothers Inc. (TOL - Get Report) dipped 4.63% to $44.47, while the iShares Dow Jones U.S. Home Contstruction ETF (ITB - Get Report) fell 1.4% to $39.42. Real estate brands site Zillow Group Inc. (ZG - Get Report) shares were down 1.33% to $39.99.

Bank stocks fared better. Although homeowners all eventually work through a bank to finance a home, big banks were optimistic on other aspects of proposed tax legislation.

Wells Fargo & Co. (WFC - Get Report) shares were higher 1% to $56.38. JPMorgan Chase & Co. (JPM - Get Report) stock gained 0.63% to $101.57 and Bank of America Corp. (BAC - Get Report) stock pushed higher 1.33% to $27.90. The Financial Select Sector SPDR ETF (XLF - Get Report) was up 1.01% to $26.91.

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