Payroll Tax Cut Hurts Homeowners

The Senate approved a two-month extension of a payroll tax cut Saturday which would also extend jobless benefits through February 2012 and a two-month freeze of scheduled cuts to Medicare payments to doctors.

The Senate version of this bill would be paid for by increasing home loan guarantee fees charged to Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac as well as the Federal Housing Administration (FHA) by one-tenth of 1 percentage point.

The increase would amount to about $15 a month more for a $200,000 mortgage.

The fee is passed on to home buyers and will apply to many new purchases and home refinancing agreements starting January 1^st 2012. The money raised would go to the Treasury Department, however, not to Fannie and Freddie.

The Mortgage Bankers Association, National Association of Home Builders and National Association of Realtors sent a letter Thursday to Sen. Bob Casey (D., PA.), the author of the tax package, saying the fees “should not be diverted for purposes unrelated to the safety and soundness of the housing finance system. “

“Fannie and Freddie are already floundering under the weight of the ongoing housing crisis and I fear this could only further worsen their ability to help struggling homeowners.” says Rep. Dennis Cardoza, D-Calif.