The Federal Government Plans to Pay For Payroll Tax Cut by Raising Fees That Banks Pay to Fannie and Freddie. So Now is Certainly The Best Time to Buy a Home in Cook and Lake County Illinois Before The Extra Fees Get Legislated.
The government plan is to raise the fees that banks pay mortgage giants Fannie Mae and Freddie Mac to guarantee home loans. These are called “guarantee fees,” and are supposed to cover mortgage defaults in a normal housing market.
Fannie and Freddie are currently in debt to U.S. taxpayers for a collective $152.7 billion.
Sadly - Senate Democrats and House Republicans like the idea, which under the Senate proposal would raise $38.1 billion. Senate and House versions differ on how much the fees would be raised, but both proposals are additions of just less than one percent of the loan.
The Republicans love the idea of raising the cost of using Fannie and Freddie, because that could bring the private sector back to the mortgage market. The Democrats see it as very convenient and not very painful way to extend a tax cut that millions of consumers enjoy.
The banks will pass this increased fee on to borrowers in the form of higher interest rates on mortgages. In essence, it’s a conduit for the home buyer to pay the bank to pay Fannie and Freddie to pay the Treasury to pay for the tax credit. The public's money is simply redistributed with various middle men in between.
The housing industry hates it, and so the Mortgage Bankers, National Association of Realtors and National Association of Home Builders penned a coalition letter to Speaker of the House, John Boehner:
NAR stated: "We strongly believe that fees charged by the Enterprises [Fannie/Freddie] to manage risk and enhance capital should not be diverted for purposes unrelated to the safety and soundness of the housing finance system.”
The danger is establishing a precedent to tax the home purchase transaction to fund things that have nothing to do with housing, so that any time government needs money - this will be an easy place to turn.
With no appetite for private investment in mortgages, this action will simply drive more business to FHA.
The measure did not pass a vote last week but is expected to survive this week, as it will be attached to a “continuing resolution” to keep funding the government. The Real Estate industry will likely lose this one because the tax break is simply far more politically popular than the fear of future meddling in mortgages.
What's the bottom line for home buyers? Rates may be as low as you'll see them for a long while. And with prices at rock bottom, and with an expert negotiator on your side for Lake and Cook County Illinios (we occasionally cover other counties as well) -- it's hard to go wrong.
Feel free to contact Buyer Broker Chicagoland if you are serious about purchasing in the next few months.
We only accept clients who are pre-approved (or will get pre-approved before we work with them) and meet a number of other qualifications.
We are all about giving you the peace of mind you need to make the most important decision of your life.
If you are serious about buying a home in the Chicago area within the next 90 days - feel free to contact us. As an Exclusive Buyer Agent / Broker (always on the buyer's side - never on the seller's side) we work with a select number of clients - so that we can provide the highest possible level of service. Our personalized research and attention pays off for you - the home buyer.
In the meantime - feel free to download our GPS-enabled home search application onto your cell phone (works with any type of phone - as long as you have web browsing capability) by texting BBC to 87778.
Call 847-566-7558 or e-mail to schedule a complimentary initial consultation – so that I can determine if you are qualified to be a client. Thanks and have a great day!