October 20, 2015 by Jeff Lowen
Who drives on the highways? Oh yeah, it’s just homeowners, right? Whew! Glad we cleared that up… Seriously though, in a long-term Transportation bill the Senate recently passed, there’s a new tax in town. Aimed at mortgages and cleverly disguised as a “fee.”
Currently, a portion of every loan that’s backed by Fannie Mae and Freddie Mac, otherwise known as ‘conforming,’ includes a fee used to offset losses from bad loans and admin costs of running these companies; affectionately called “g-fees,” or guarantee fees. Way back in 2011, Congress added on .1% of the value of the loan to this “g-fee” of every new loan to fund six month extensions of unemployment benefits. This little ‘bump’ was set to end in 2021.
Now, guess what? The U.S. Senate just passed a bill that extends this fee until 2025 for all new mortgages in order to pay for transportation infrastructure. What’s next?
Correct me if I’m wrong, but are our mortgages the wagon that carries the weight of whatever our voted representatives feel that needs attention? Is it any wonder the real estate market is so volatile? What do transportation and unemployment have to do with real estate? Perhaps that’s not a prerequisite.
This actually hits home buyers in the pocketbook which translates to their affordability which translates into their ability to pay for your home when you’re selling! If you’re buying a $500,000 home, which is not uncommon in my market, you could be throwing nearly $10,000 at this!
This effectively reduces your home buying power! That’s about $60.00 per month, too!
Why do they have to ‘disguise’ it? It’s not a fee – Let’s call it what it is… A tax! Is the Senate afraid of us finding out about their bait and switch gig? And, just so we’re clear… If it’s got nothing to do with the risks associated with buying a home, it’s not a fee… It’s a tax!
To top it off, before this bill was passed, in the explanation of funding the bill, the regulator for Fannie Mae and Freddie Mac recently completed a review of the guarantee fees and found ‘no compelling economic reason to change the general level of fees’ which are continued by this provision.
So, what do you do?
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