The Government Giveth And The Government Taketh Away, All At Once? So Where Is The Gain?

January 13th, 2012

I just heard that Federal Housing Finance Agency (FHFA) has implemented a hike to the Fannie Mae/Freddie Mac guarantee fee. This is the fee that the Government Sponsored Enterprises (GSE’s) which are now actually GOE’s (Government Owned Enterprises) pays to the government for their backing. They raised this fee to pay for the Temporary Payroll Tax Cut. The announcement said specifically:

“The two-month extension of the Temporary Payroll Tax Cut, signed by President Obama December 23, holds immediate implications for the GSEs. The law requires the Federal Housing Finance Agency (FHFA) to increase Fannie Mae’s and Freddie Mac’s guarantee fees by at least 10 basis points over the 2011 average for all single-family, mortgage-backed securities. The increase will be remitted to the U.S. Treasury, rather than retained as reserves by the Enterprises. The law goes into effect immediately. The FHFA must also create a schedule of guarantee fee increases over the next two years.”

Uh oh, look out. So this means interest rates can go up because fees go up. Usually interest rates go up because the market pushes them up. But now they are going up because the government is looking to pay for a giveaway! Outrageous! We should all be howling. While the administration is taking credit for this payroll tax cut it’s paying for it on the backs of homeowners over the next several years!

Because of this I have seen banks already increased their pricing to incorporate this added fee. It looks like it may be as much as 1/8% in interest rate. So some mortgage clients may have noticed interest rates have gone up a bit overnight seemingly. Now they know why.

This deal to increase mortgage fees essentially pays for the ongoing payroll tax holiday through additional fees collected through the GSE’s over the next 10 years. The increase is projected to be about $70 billion. So the current payroll tax holiday is being subsidized by additional fees on current and future homeowners. This issue is buried. I highly doubt many people are aware of this. Anyone else mad?

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Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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