Friday, January 13, 2012

Mandatory Increase In Mortgage Loan Fees Directed to Fannie Mae and Freddie Mac

On December 23, 2011, President Obama signed into law the Temporary Payroll Tax Cut Continuation Act of 2011. Among its provisions, this new law directs the Federal Housing Finance Agency (FHFA) to increase guarantee fees charged by Freddie Mac & Fannie Mae by no less than 10 basis points from the average guarantee fee charged by these companies in 2011 on single-family mortgage backed securities....

This requirement is effective immediately, meaning that the average guarantee fees charged in 2012 need be at least 10 basis points greater than the average guarantee fees charged in 2011 and that this increase be remitted to the U.S. Treasury rather that retained as reserves by Freddie Mac and Fannie Mae.

Basically what this means is mortgage rates are going up and are being "taxed" in order to pay for the payroll tax cuts. So essentially, homeowners will pay for this program. Not to mention it will put a downward pressure on home values as new buyers will have reduced buying power. This definatley does NOT help to stimulate the struggling housing market. Additionally the money will be transfered from Fannie and Freddie to the Treasury.