Two
Things You May Have Missed
by Dean Hartman on
February 16, 2012
Before the end of
the year, Congress and the President agreed to extend the payroll tax cut. In
that bill, there were two items of interest for those involved in real
estate.
1.) The hike in
the Guarantee Fees charged by the GSEs Fannie Mae and Freddie
Mac.
The 10 basis point
increase in the fees has translated to a .375% to .5% increase in mortgage rates
for conventional loans. Many customers who started their loans a couple of
months ago are being “surprised” with higher than expected rates. Heck,
everything you read in the papers says rates are at historic lows and will
likely stay there through 2014. Many consumers feel as if their lender is being
unscrupulous. However, your lender has fallen victim to the increase in
Guarantee Fees and how the secondary market is passing on the cost. What looks
like possible lender greed is just a passing on of the increased expense imposed
by the government. Sadly, the increased revenue isn’t even being used to help
aid an ailing Fannie Mae or Freddie Mac. It is being turned over to the US
Treasury to cover the temporary extension of the payroll tax
cut.
2.) Permission for
HUD to increase the insurance premiums they charge on FHA loans.
If you remember,
HUD charges two insurance premiums – a monthly one and an up-front one that is
usually added into the loan. Most recently, they reduced the up-front mortgage
insurance premium (UFMIP) and dramatically raised the monthly fee (MMIP). It is
widely anticipated that, maybe as soon as April, we will see a hike in the UFMIP
with no adjustment to the MMIP. While this will help shore up the reserves in
the insurance fund, it will simultaneously make buying a home more expensive. No
one knows the effective date or amount of the increase. Buyers should look to
buy before the increase in fees.
We always hear how
our government officials tuck away things in their bills. In this case, while
the headlines during the holidays praised Washington for preserving the payroll
tax cut, they may have hurt us more in the long run.
