The mortgage tax deduction provides a huge amount of what turns out to be disposable income for the middle and lower-middle class. Take that away, and the ripples in the economy would be massive. Similarly, all current house prices would be trimmed by at least 20%, and most likely more than that due to how the tax deduction is able to help with principal payments. If we have another 20% trim of house prices across the board, you're looking at -- at the very least -- a return of the great recession. As mortgage rates are already at their lowest point, there's not much further down they can go to compensate for the sudden lack of demand that will occur.
Spending money gone. House price chopped in half, sending more people underwater. Mortgage interest rates nowhere to go. That's a trifecta of disaster.