Maryland layoffs will see another 82 added to the total as First Guaranty Mortgage Corp. job cuts land at the company’s offices in Frederick.
The Maryland layoffs were announced on Tuesday and confirmed by the company, although no further comment was given.
The company is based out of Tysons Corner, Virginia. It is planning to retain the office location following the Maryland layoffs. The total number of employees working at the office, both before and after the cuts, is unknown.
The First Guaranty Mortgage Corp. job cuts come despite the company being named to Inc.’s list of one of the 5,000 fastest-growing companies for the past three years straight. In 2015, the company registered revenue of $99.9 million and had 658 employees, according to the magazine.
The Maryland layoffs come at a time of increasing concern for both mortgage lenders and those shopping for a home more broadly.
The biggest news to impact the mortgage industry is from the tax plan currently making its way through Congress. Touted as a signature piece of legislation by the Trump administration, the plan has drawn much controversy due to disputes as to just how much the average American will benefit from the massive, across-the-board tax reductions.
One aspect of the tax plan that has pained mortgage lenders is the reduction to the eligible deductions on mortgage interest. In current law, the cap on mortgages eligible for deductions is at $1.0 million, but if the House bill passes, that could be dropped dramatically down to $500,000. This would essentially strip tax incentives to buy a home, making mortgages smaller and less frequent due to the increased tax burden.
On top of that, the new tax bill would favor a generalized deduction, as opposed to an itemized deduction. It increases the general deduction rate for families from $12,000 to $24,000. This would motivate people to do away with itemized deductions. As such, there’s less incentive again to take out a mortgage because the tax benefits would probably be less than the $24,000 you could get otherwise.
An article from The New York Times has claimed that 44% of homes in the U.S. are worth enough to benefit from itemized taxes, but that number would plummet to 12% under the House plan and drop even further to seven percent in the Senate proposal. In both cases, there are far fewer benefits to mortgages in terms of taxes under both Houses’ plans.
“The bills would eliminate or cripple the tax incentives for homeownership for the first time in over 100 years since the inception of the Internal Revenue Code for most people, but it would also drop the home values for everybody,” Evan Liddiard, the senior policy representative for the National Association of Realtors, said to reporters as the legislation advanced.
The result would be a double-edged sword of sorts for the average American. On the one hand, you’d have less incentive to take out a mortgage. On the other, home prices, which are hitting record highs across the U.S. and especially in urban areas, would likely fall as a result. This would allow more people to enter the market and may even open it up to lower-income families.
But mortgage lenders are likely to pay a price for the tax plans should they be passed as currently constructed. That, however, is by no means guaranteed. There are rumblings that several Republican senators may oppose the plan as currently written. Not to mention that the Trump administration has notoriously had trouble bringing the party together to pass key pieces of legislation, as seen with the Affordable Care Act repeal, immigration reform, and other policy initiatives put forward by President Donald Trump and his staff, who have yet to pass a single piece of signature legislation almost a year after Trump’s inauguration.
“Safe as houses? Both GOP tax bills undermine the mortgage interest deduction,” Washington Examiner, November 26, 2017.
“Under the Trump Tax Bill, You’ll Probably Stop Itemizing Your Deductions,” New York Magazine, November 28, 2017.
“Mortgage lender laying off 82 workers at Frederick office,” Baltimore Business Journal, November 28, 2017.