after watching how this thread developed, please go back to what @Critter posted as this is from publication 936 (page 4) which has been posted 3 times in this thread . This is the 'tracing' language many are referring to with the salient portions in red font.
Choice to treat the debt as not secured by your home. You can choose to treat any debt
secured by your qualified home as not secured by the home. This treatment begins with the tax
year for which you make the choice and continues for all later tax years. You can revoke your
choice only with the consent of the IRS. You may want to treat a debt as not secured
by your home if the interest on that debt is fully deductible (for example, as a business expense) whether or not it qualifies as home mortgage interest. This may allow you, if the limits in Part II apply, more of a deduction for interest on other debts that are deductible only as home mortgage interest
