[bwc2221]

Remove the mortgage exemption and watch the bottom really fall out of the housing market. Everyone will be walking away from “underwater” mortgages (and many more that are not under water).

[nomorelurker]

It is falling now. How much government intervention do you want to keep it up?

[Alberta's Child]

Actually, I think a gradual removal of the mortgage interest deduction over the course of 5-10 years (maybe allow 100% of the interest to be deducted in Year 1, 90% in Year 2, etc.) would help soften the impact on the housing market.

Another intriguing possibility would be to leave the deduction in place for the remaining life of all existing mortgages -- while at the same time also applying that rule to any mortgages that are currently in place on foreclosed homes. This would make those homes very appealing to prospective buyers (knowing they can take advantage of a tax break that may not be available if they buy a regular home), wouldn't it?