Remember when Obama said his new proposed two month payroll tax waiver extension wouldn’t add to the deficit? Well someone has to pay the price, and they found a way to pay for it and bury it out of view… a new back-end mortgage tax. Any loan delivered to Fannie Mae or Freddie Mac (our government backed loan purchasers) after April 1st will include an additional tenth of a percent fee tacked in to your interest rate that will go directly to the US Treasury, they’re calling it a Guarantee Fee. 10 bp (basis points, 100bp being 1%) is just the first fee increase, and the new tax verbiage leaves the door open to raise that fee again as needed. And once the Treasury wets their mouth with this new revenue, don’t expect to see it disappear any time soon. FHA will similarly see an increase in the monthly mortgage insurance premium for new loans funded after a not yet announced future date, probably sometime on or after April 1st as well. At least the FHA MIP will fall off at some point during the loan term.
So the cold hard truth is that they decided to fund a 2 month payroll tax waiver extension, hooking up your company/boss with a little more pocket money, by taxing the housing recovery and directly hitting you in the pocket over the life of your loan. Job Creators, Job Creators, I’m sick of hearing all this crap about the job creators, who instead of creating jobs are just increasing profits. Doesn’t matter if it’s a Democrat or a Republican at the wheel, expect to be screwed. One can just shake their head in disbelief…
At the end of the day this will just be one more back end fee that is attached to your final rate. A tenth of a percent is not the end of the world; I’ve seen intraday mortgage price changes worse than that. Rates could drop a bit more, or they could adjust up just as quick, most won’t even notice the tax (which of course was the idea). It’s the way in which our government does things and who becomes penalized that is frustrating. Just like future generations will be responsible for paying back our current National deficit, new borrowers carry the burden of paying back the losses of a previous housing bubble with overly tight underwriting, higher risk based fees, and higher mortgage insurance premiums in what is now a much more stable and lower risked mortgage environment.
So, what can we do? Live and adapt. If you are thinking about doing a FHA Streamline refi or purchase, do it now before the Mortgage Insurance Premium goes up again. If you are in the market for a Conventional loan, now is the time to lock. Even though the Fannie/Freddie Guarantee Fee isn’t scheduled to take affect until April 1st, most believe that this increase should start to reflect on mortgage applications in February, if not sooner.