Raise Mortgage Fee to Pay for 2-Month Tax Break? Not a Good Idea

We asked the other day if there was any sort of nexus between an extension of the payroll tax cut and fees paid by homebuyers. The L.A. Times points out that upping the fee could have long-term effects on the health of the housing market.

Reporter Jim Puzzanghera notes that the fee - which, remember, is paying for a two-month extension of the payroll tax cut - would cost the buyer of a $200,000 home an extra $4,000 over the life of the loan. He also says increasing the fee paid on loans sold to Fannie Mae or Freddie Mac will further complicate efforts to reform the so-called GSEs. 

The article quotes Jaret Seiberg, senior financial policy analyst at Guggenheim Parters in Washington:

Housing doesn't need any more speed bumps, and this is a speed bump. It's not a big one, but every extra penny that it costs to finance a home puts that much more downward pressure on home prices.

And as the article also points out, "The collapse of the housing market triggered the Great Recession and led to a wave of foreclosures as housing prices plummeted nationally. The market has been struggling to recover amid weak economic growth and high unemployment."

NAHB, the Realtors and the mortgage bankers all urged Congress not to use the fee to pay for the tax break.

Comments

[Brochure Printing]

Certainly NOT a good idea.