Housing and Urban Development Secretary Samuel R. Pierce Jr. promised the nation's home builders today that the Reagan administration "will not resolve federal deficits by eliminating tax deductions for mortgage interest."
Pierce referred to recent reports that the administration might seek to eliminate the tax deduction for mortgages on second homes, a spokeswoman for Pierce said after his speech. She added that HUD "is not aware" of any move to do away with tax deductions for other types of mortgage-interest payments.
Last month Treasury Secretary Donald T. Regan indicated that elimination of the mortgage interest deduction for second homes was one of the deficit-reducing measures the administration was considering. Reports that such a step was being contemplated provoked an outcry from the real estate industry.
Most sources in the industry said so little revenue would be raised by the measure that they feared it was really a prelude to an attempt to eliminate or cap interest deductions on all home mortgages.
Speaking to many of the estimated 35,000 members of the National Association of Home Builders attending an annual convention in Houston, Pierce painted a rosy picture of the housing industry's future. He predicted that the industry will recover its vigor this year and remain healthy throughout the 1980s.
He said he expects housing starts to reach between 1.4 and 1.6 million units this year compared with just over 1 million in 1982. He also pointed to the drop in FHA home mortgage insurance rates from 16 1/2 percent to 12 percent during 1982, which added 5 million prospective homebuyers to the ranks of people who now can afford monthly mortgage payments.
With an increase of $6.1 billion in mortgage insurance authority for this fiscal year for FHA loans, construction of 175,000 more units of housing will be possible. This, in turn, will mean more jobs, he said.
Pierce also told the home builders:
* HUD will implement a streamlined mortgage-backed securities program called Ginnie Mae II. The Government National Mortgage Association, known as Ginnie Mae, already provides more than three-fourths of the funds for VA and FHA loans, and Ginnie Mae II is expected to make GNMA securities more attractive to buyers and thus generate even more money.
* The department is working to attract more pension fund investment in mortgages by trying to eliminate some of the regulations that restrict such investment. HUD also has begun monitoring pension-fund investment in mortgages in an attempt to resolve some disputes on the size of that investment.
* HUD is trying to speed processing of FHA applications, which are backed up for as much as five to eight weeks in some areas.
* HUD and home builders are working with developers and state and local governments in more than 20 communities to cut costs by reducing unnecessary regulations. They also are trying to "encourage the kind of housing needed for today's smaller and more diverse households."