Interesting article in the Sunday New York Times Magazine:  Who Needs the Mortgage-Interest Deduction?, by Roger Lowenstein:

It’s hard to imagine that Congress would intentionally legislate such a rich-get-richer handout, but the origins of the deduction are so obscure that the myth about it persists. David Lereah, chief economist for the National Association of Realtors, explained the history of the deduction by observing matter-of-factly: "Homeownership is something this country desires. If you read the tax codes over the last 100 years, you’ll see the favoring of the housing sector and all the reasons Congress was giving for it." Congress has indeed done plenty of things over the years to support homeownership, but the deduction wasn’t one of them. That mole in the Treasury Department who invented the deduction so I could buy a house — he never existed. In fact, as Steven Bourassa, of the University of Louisville, and William Grigsby, at the University of Pennsylvania, wrote in "Housing Policy Debate," a Fannie Mae publication, the mortgage deduction "was largely accidental."