To pay for a two month extension in the payroll tax, Congress (both sides of the aisle), and the President have decided to tax real estate loans for the next ten years. This was voted in recently, and will now start affecting real estate transactions.
It’s not been publicized as a tax because it’s been identified as an increase in the agency’s “Guarantee Fee”. But the money does not go to the agency’s, it goes directly to the US Treasury. The fee is only 10bps(bps stands for “basis points” which means 1/100th of a percent, or .1%). But, when market factors come into play(like lock term, etc.), it will be more. The largest US mortgage lender said recently that some programs will be affected as much as 80 bps.
This will not be an additional fee on the Good Faith Estimate, but will be factored into pricing. Industry estimates conclude that the typical borrower will pay approximately $4,000 more during the life of their loan.
Let’s face it, this is a tax. A couple interesting thoughts come to mind when considering this new tax.
First, since Fannie Mae and Freddie Mac are now a funding source for the US budget this works against the goal of both parties to “wind them down”, or eliminate them and replace them with private funding sources.
Second, for those of you who will immediately jump on this as “liberal” spending….the “conservatives” were also in favor of this new tax, despite their signing of the “no new taxes” pledge.
Third, housing has led the economy out of recession historically. Housing is still hurting nationally. The Federal Reserve has kept interest rates low to stimulate the economy and just last week wrote a letter to Congress expressing the importance of housing in revitalizing the economy. It makes you wonder why all these “job creators” in Washington, D.C. are for this tax that will serve as an additional barrier to stimulating housing and create jobs.
It would appear that the Nation’s leaders have other priorities. What they are, who knows
- Fannie, Freddie overhaul unlikely, by Vicki Needham, Thehill.com (oregonrealestateroundtable.com)
- Fannie Mae Extends Mortgage Relief for the Unemployed (tominvestor.wordpress.com)
- Can anyone save Fannie Mae and Freddie Mac? (money.cnn.com)
- A Brief History of Fannie Mae and Freddie Mac (time.com)
- Fannie Mae CEO Exit Reveals Housing Policy Chaos (huffingtonpost.com)
- Bernanke Doubles Down on Fed Bet Defied by Recession: Mortgages (businessweek.com)
- Fannie, Freddie Turmoil Opens Market to Tough Mortgage Medicine (thestreet.com)
- The Fine Print – Home Buyers to Pay for the Payroll Tax Cut (legallyeasy.rocketlawyer.com)
- NCBA Applauds the GAO Recognition of the Cooperative Business Model as Solution for Restructuring Fannie Mae and Freddie Mac (prweb.com)
- What President Obama can do for the economy without Congress: Mass mortgage refinancing (dailykos.com)