Monday, February 6, 2012
Hidden Mortgage Fee: Paying for the Payroll Tax Cut?
Joe: the government is okay to bail out the automakers but not the middle class – the middle class must bail out the
government. -Bob US
February 6, 2012 8:06 AM
Just before Christmas, American workers got a rare gift from
politicians - the current payroll tax cut . Washington
At the time, both President Barack Obama and House Speaker John Boehner lauded the move to avoid a tax increase for millions of working Americans. But there's something the politicians weren't bragging about - the fact that they're paying for the two-month tax cut with what has turned into a brand new fee on home buyers.
The new fee is a minimum of one-tenth of 1 percent on Fannie Mae- and Freddie Mac-backed loans, and is likely to go much higher. It will be imposed for the next 10 years on most mortgages and refinancings and it lasts for the life of the loan. For every $200,000, it amounts to an extra $15 dollars a month. It's bad news for Patty Anderson, who's buying a home in
. Virginia will save a couple hundred dollars from having her payroll tax cut extended but her mortgage broker told her the new fee would cost her almost $9,500. "I was absolutely startled that it would add up to that much," she said. Anderson
The $35.7 billion collected in fees won't go into the Social Security fund to replace the lost payroll tax. It goes to the general treasury where Congress can spend it however they please.
's broker and president of the Virginia Association of Mortgage Brokers, said you won't see Congress' new charge in the paperwork, but it's there. "It's actually built into this [interest] rate. You would never see the fee as a cost to you," he said. Burnett said the fee will affect a "very large number" of homeowners. "Your pocketbook is being raided in order to pay for a tax policy issue decided at the last minute by probably people who didn't understand fully what they were legislating on." Anderson
An Obama administration official defended the mortgage fee, calling it "modest." She said it's "unlikely to negatively affect borrowers" because increases "will be phased in over the next two years." And it will "help bring private capital back into the mortgage market, which [is] good for borrowers over the long term." Maybe so. But Patty Anderson only knows that for the next 30 years, she'll be haunted by the
ghost of Christmas past. "I think it just looks like Washington grabbing more money," she said. Washington