In this CNN article Bush: ‘Don’t worry about mortgage deduction’ 
Answering a question from a home builder during a question-and-answer forum in Florida, Bush said, “I don’t think you have to worry about the mortgage deduction not being a part of the income-tax law.” In November, a tax reform panel appointed by the president submitted a report that recommended putting limits on the mortgage interest tax break in two ways:
Lowering the mortgage-interest cap, which is the amount of a loan on which homeowners would receive a tax break for interest paid. The panel suggested lowering the cap from $1 million to the average regional home price, in the range of $227,000 to $412,000.
Converting the mortgage interest deduction to a tax credit equal to 15 percent of interest paid on mortgages up to the cap.
Bush seemed to settle concerns that the mortgage rate tax deduction, the bedrock of the housing market, would be introduced. The removal of the deduction  idea had come up initially as a way to quickly offset lost revenue from the Alternative Minimum Tax that was going to be phased out.
I still have a problem with the contradiction coming from the government regarding this issue. Housing has always been a centerpiece of economic stability and servcies relating to homeownership has been a key driver of the economy. Homeownership has reached an all time high of 69.2% of Americans [WSJ] . Seemingly everyone has bought into that ideal.
With a weakening housing market, the loss of the mortgage deduction at this point could become a flash point causing far more damage than would have occured if the market was still in the middle of a housing boom. It has been said that the loss of the deduction could drop housing price levels 10% to 15% overnight. With all the problems Bush has had in the polls in recent months, he seems to have decided its a fight not worth pursuing.
Plus he would lose his deduction for his ranch [Google] .