PMC Mortgage Lender's Blog

“The House voted 234-193 Tuesday evening of last week to extend payroll tax cuts and jobless benefits,” reports Andrew Scoggin of Housing Wire. But this is bad news for the housing industry.

The House Bill HR 3630 would increase guarantee fees (G-fees) charged by Fannie Mae and Freddie Mac. The fees, however, would go directly to the Treasury Department, not to the GSEs.

The president of the Mortgage Bankers Association, David Stevens, reacted negatively writing, “In their effort to raise revenue in order to extend the current payroll tax holiday, policymakers have proposed imposing a new tax on homebuyers that will cost each homebuyer thousands of dollars over the life of his or her loan.”

“This new tax comes in the form of a proposed 10-basis-point increase in the guarantee fees charged by Fannie Mae and Freddie Mac,” continued Stevens. “For the average borrower, that could mean an additional $4,000 in fees over the life of a $200,000 mortgage.”

The Mortgage Bankers Association, the National Association of Realtors, and the National Association of Homebuilders told lawmakers that redirecting revenue from Fannie and Freddie for purposes unrelated to the health of the housing finance system is counterproductive.

Originally, the Senate had only proposed increasing the guarantee fees charged by Fannie Mae and Freddie Mac on sales of mortgage backed securities. In response to lobbying efforts from private mortgage insurers, the Senate agreed on Saturday to increase the mortgage insurance premiums on FHA mortgages to avoid giving FHA financing a competitive advantage.

Housing experts say it is easy to understand why Congress would decide to offset the cost of the payroll tax reduction with increased mortgage fees. The mortgage fees will not directly tax anyone that already has a mortgage. So, there is no existing group of tax payers that will be immediately affected by the hike in mortgage fees.

Time is running out on the Dec. 31 deadline. The take-home pay for 160 million Americans will decrease in January unless the House and Senate can come to a compromise and approve an extension of this year’s cut in the payroll tax.

A worker earning $50,000 a year would see take-home pay drop by $1,000 over the year. For those paid biweekly, each paycheck would be $38.46 smaller.