Homeowner Tax Relief Extended

Homeowners with a new mortgage that is covered by insurance can claim a tax break on the insurance for the first time this year.

The new break, called the qualified mortgage insurance deduction, lets taxpayers with an adjusted gross income of less than $100,000 write off the full cost of mortgage insurance. Folks who earn less than $109,000 can take a write-off for part of it.

To qualify, the mortgage must have originated between 2007 and 2010. The deduction can be taken for insurance on a principal residence or a second home.

Introduced by the Tax Relief and Health Care Act of 2006, the break initially applied only to the 2007 tax year, but it was extended through 2010 by the Mortgage Forgiveness Debt Relief Act of 2007.

"It's something we will definitely ask our clients about," said Jackie Perlman, senior tax research coordinator at H&R Block Inc. "If you come in and say you bought a home, we'll be checking it out and making sure you get that deduction."

The mortgage-insurance deduction will help first-time home buyers who are unable to put down 20%. Typically, "if you put down less than 20% down, that's where the lender would require private mortgage insurance," said Katie Monfre, a spokeswoman for Mortgage Guaranty Insurance Corp., a private mortgage insurer in Milwaukee owned by MGIC Investment Corp.

On average, the annual tax break from the deduction will be worth around $350 per taxpayer, according to the Mortgage Insurance Companies of America, which represents mortgage insurers.

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Whose side are they on?

Government efforts to stem foreclosures mean fewer chances for people priced out of the market.

Some people are cheering for a plunge in local housing prices: Those who watched the market rocket skyward and waited patiently for the return trip, resisting the temptation to spend more than they could afford.

Linda Werbner and Mark Muzeroll sat out the boom in a small Lynn condominium. Now they're eyeing the housing market "longingly but cautiously," Linda said, hoping for "a slew of homes to be had for a song."

They'd like to buy a small Colonial where Mark, a piano teacher, can play a partita at 2 a.m.

In Boston and other hyper-expensive markets, the surge in foreclosures and the resulting drop in prices isn't bad for everyone. Government efforts to limit foreclosures have the effect of favoring people who want to stay in their homes over the people who want to move in next.

Tom Callahan, executive director of the Massachusetts Affordable Housing Alliance, said he's torn by concern for homeowners, but "our hope for home buyers is that the market softens somewhat.

"When a market has been as hot as it's been for the last while, your hope is for prices to come down," he said.

Prices in the Boston area more than doubled between 1995 and 2005, even adjusting for inflation. Lax lending standards played a big part. Sellers raised prices, and buyers easily borrowed the wanted money.

By 2005, the area's median housing price was $492,000. Under federal standards, such a home was affordable to families making at least $135,000 a year. The area's median family income: $82,600.

Many families chose to stretch, agreeing to monthly mortgage payments that consumed a larger share of income than the recommended 28 percent - often a much larger share. Many of them are now are facing foreclosure.

Werbner and Muzeroll chose not to stretch. Werbner is a social worker. Muzeroll teaches piano. In 2003, the couple paid $155,000 for a 750-square-foot condo, with comfortable monthly payments. They watched the housing boom lift Lynn. Abandoned industrial buildings became desirable residential lofts. Prices went up, up, and away. New residents came flooding in. Then they watched the market start to collapse. Desirable residential lofts became difficult to sell. Prices started plunging. Residents started leaving.

They began dreaming about buying a sin gle-family home this spring.

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