Graduation Year

2018

Date of Submission

12-2017

Document Type

Campus Only Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

Matthew Magilke

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Rights Information

© 2017 Cara A. Brinster

Abstract

This paper examines one of the most controversial items of the new GOP tax bill, the Mortgage Interest Deduction. The paper seeks to identify which groups would feel the greatest financial burden if the deduction is limited in the future tax code. The author identifies potential declines in mortgage interest rates and expensive home values as two key motivations behind the lobbying efforts for this deduction to remain untouched. Using data on mortgages originating in 2016, the author estimates a decline in mortgage interest rates between .039 and .043 percent for every $1,000 borrowed above the 2016 MID limits for taxpayers. The paper then goes on to discuss interest rate volatility implications for Mortgage Servicing Assets. The paper ends with a discussion on the downward pressure the new tax reform may have on expensive home values.

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