[Congressional Record Volume 149, Number 57 (Wednesday, April 9, 2003)]
[Senate]
[Pages S5084-S5085]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SMITH (for himself and Mrs. Lincoln):
  S. 846. A bill to amend the Internal Revenue Code of 1986 to allow a 
deduction for premiums on mortgage insurance, and for other purposes; 
to the Committee on Finance.
  Mr. SMITH. Mr. President, I rise today with my Finance Committee 
colleague, Senator Lincoln, to introduce the The Mortgage Insurance 
Fairness Act. This legislation will extend the mortgage interest tax 
deduction to mortgage insurance payment premiums, both government and 
private. It will make mortgage insurance payments tax-deductible and 
will boost homeownership in Oregon and across the Nation, for those 
lower-income, minority and veteran borrowers that typically need 
mortgage insurance to purchase a home.
  It is widely recognized that homeownership helps create stable and 
safe communities. Thus, the Federal Government has long sought to 
increase homeownership. The Bush Administration has announced a target 
of 5.5 million new homeowners by the year 2010. To achieve that goal, 
groups that have typically had difficulty purchasing homes--young 
people, low-income families, members of minority groups--must be able 
to participate in the housing market.
  Government and private mortgage insurance programs help first-time, 
low-income and veteran borrowers afford to purchase a home. The 
Veterans Affairs, VA, Federal Housing Authority, FHA, Regional Housing 
Authority, RHA, and Private Mortgage Insurance,

[[Page S5085]]

PMI, programs allow buyers to make a down payment of 3 percent or less 
of the appraised value. Mortgage insurance is a critical factor in 
allowing middle-income families and minorities to become homeowners. In 
Oregon, more than 137,000 families held mortgages with either FHA or 
private mortgage insurance at the end of 2002 and insured mortgages 
covered 25 percent of home purchase loans originating in 2001. Sixty-
two percent of the insured home purchases in Oregon in 2001 were low-
income borrowers. The Mortgage Insurance Fairness Act will bring tax 
relief to those who need it the most.
  In 2001, nationwide, mortgage insurance covered 57 percent percent of 
mortgage purchase loans made to African American and Hispanic borrowers 
and 54 percent percent of the loans to borrowers with incomes below the 
median income. The people who use mortgage insurance are regular 
working families who live in every community throughout the country. 
Currently, twelve million American families use mortgage insurance.
  Presidently, these borrowers cannot deduct the cost of their mortgage 
insurance payments for Federal tax purposes. If mortgage insurance 
payments were made deductible, the cost of homeownership would be 
further reduced for these borrowers, enabling new buyers to get into a 
home that they might not have been able to afford. It is estimated that 
the Mortgage Insurance Fairness Act would increase the number of 
homeowners by 300,000 per year.
  Extending the tax deduction for home mortgage interest payments to 
mortgage insurance payments will significantly contribute to making the 
American dream of owning a home come true for many more of our 
citizens. I urge my colleagues to support this important bi-partisan 
legislation and join us in working towards its enactment at the 
earliest opportunity this year. I ask unanimous consent that the text 
of this legislation be printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 846

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Mortgage Insurance Fairness 
     Act''.

     SEC. 2. PREMIUMS FOR MORTGAGE INSURANCE.

       (a) In General.--Paragraph (3) of section 163(h) of the 
     Internal Revenue Code of 1986 (relating to qualified 
     residence interest) is amended by adding after subparagraph 
     (D) the following new subparagraph:
       ``(E) Mortgage insurance premiums treated as interest.--
       ``(i) In general.--Premiums paid or accrued for qualified 
     mortgage insurance by a taxpayer during the taxable year in 
     connection with acquisition indebtedness with respect to a 
     qualified residence of the taxpayer shall be treated for 
     purposes of this subsection as qualified residence interest.
       ``(ii) Phaseout.--The amount otherwise allowable as a 
     deduction under clause (i) shall be reduced (but not below 
     zero) by 10 percent of such amount for each $1,000 ($500 in 
     the case of a married individual filing a separate return) 
     (or fraction thereof) that the taxpayer's adjusted gross 
     income for the taxable year exceeds $100,000 ($50,000 in the 
     case of a married individual filing a separate return).''.
       (b) Definition and Special Rules.--Paragraph (4) of section 
     163(h) of the Internal Revenue Code of 1986 (relating to 
     other definitions and special rules) is amended by adding at 
     the end the following new subparagraphs:
       ``(E) Qualified mortgage insurance.--The term `qualified 
     mortgage insurance' means--
       ``(i) mortgage insurance provided by the Veterans 
     Administration, the Federal Housing Administration, or the 
     Rural Housing Administration, and
       ``(ii) private mortgage insurance (as defined by section 2 
     of the Homeowners Protection Act of 1998 (12 U.S.C. 4901), as 
     in effect on the date of the enactment of this subparagraph).
       ``(F) Special rules for prepaid qualified mortgage 
     insurance.--Any amount paid by the taxpayer for qualified 
     mortgage insurance that is properly allocable to any mortgage 
     the payment of which extends to periods that are after the 
     close of the taxable year in which such amount is paid shall 
     be chargeable to capital account and shall be treated as paid 
     in such periods to which so allocated. No deduction shall be 
     allowed for the unamortized balance of such account if such 
     mortgage is satisfied before the end of its term. The 
     preceding sentences shall not apply to amounts paid for 
     qualified mortgage insurance provided by the Veterans 
     Administration or the Rural Housing Administration.''.

     SEC. 3. INFORMATION RETURNS RELATING TO MORTGAGE INSURANCE.

       Section 6050H of the Internal Revenue Code of 1986 
     (relating to returns relating to mortgage interest received 
     in trade or business from individuals) is amended by adding 
     at the end the following new subsection:
       ``(h) Returns Relating to Mortgage Insurance Premiums.--
       ``(1) In general.--The Secretary may prescribe, by 
     regulations, that any person who, in the course of a trade or 
     business, receives from any individual premiums for mortgage 
     insurance aggregating $600 or more for any calendar year, 
     shall make a return with respect to each such individual. 
     Such return shall be in such form, shall be made at such 
     time, and shall contain such information as the Secretary may 
     prescribe.
       ``(2) Statement to be furnished to individuals with respect 
     to whom information is required.--Every person required to 
     make a return under paragraph (1) shall furnish to each 
     individual with respect to whom a return is made a written 
     statement showing such information as the Secretary may 
     prescribe. Such written statement shall be furnished on or 
     before January 31 of the year following the calendar year for 
     which the return under paragraph (1) was required to be made.
       ``(3) Special rules.--For purposes of this subsection--
       ``(A) rules similar to the rules of subsection (c) shall 
     apply, and
       ``(B) the term `mortgage insurance' means--
       ``(i) mortgage insurance provided by the Veterans 
     Administration, the Federal Housing Administration, or the 
     Rural Housing Administration, and
       ``(ii) private mortgage insurance (as defined by section 2 
     of the Homeowners Protection Act of 1998 (12 U.S.C. 4901), as 
     in effect on the date of the enactment of this 
     subparagraph).''.

     SEC. 4. EFFECTIVE DATE.

       The amendments made by this Act shall apply to amounts paid 
     or accrued after the date of enactment of this Act in taxable 
     years ending after such date.
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