Friday, January 13, 2012

What do these things have in common...

Payroll Tax Cuts (remember that debate in Washington at Christmas time) and Mortgage Rates?

Truly, they have nothing in common. However the Payroll Tax Cut law that President Obama signed into law in December is being paid for by adding costs into every loan being originated thru Fannie Mae and Freddie Mac. Really? Yes! Unbelievable. Borrowers will pay higher interest rates going forward to pay for the tax cut.

Announcement released this week:

On December 23, 2011 the President signed into law the Temporary Payroll Tax Cut Continuation Act of 2011. As part of the resolution to the continuing debate over the Tax Cut Extension, the law increases the guarantee fee Fannie Mae and Freddie Mac charge to lenders. The fee increase can either be absorbed by the lenders and/or passed on to mortgage borrowers. Congress thinks borrowers should pay for part of it. The negative affect the increased fee will have on interest rates will cause rates to increase .125%.