On Saturday, December 17, the U.S. Senate approved a two-month extension of a payroll tax cut that is due to expire at the end of December. But did you know that as part of the Senate’s proposed plan, the cost will fall on people who buy a house or refinance their mortgage starting in 2012?
The proposal is found in H.R. 3630, the “Middle Class Tax Relief Act of 2011.” Under Title IV of the bill, called “Mortgage Fees and Premiums,” fees that Fannie Mae and Freddie Mac charge to back home mortgages would be raised. This would mean someone buying a $200,000 home starting in 2012 would have to pay about $17 extra per month – that’s $204 per year.
The usual number used by analysts who talk about the payroll tax cut is that it gives working Americans about $1,000 per year in extra cash; however, if you are buying a new house or refinancing, then you are going to lose around 20 percent of that tax break.
The fees charged by Fannie and Freddie wouldn’t be directly levied on homeowners, but on banks and other lenders; it would raise $35.7 billion over 10 years according to the Congressional Budget Office.
Before this proposal would become law, it must still be approved by the House of Representatives. Speaker of the House, John Boehner (R., OH.) has said publicly he opposes the bill.
The National Association of REALTORS®, together with the National Association of Homebuilders and the Mortgage Banker’s Association are working to ensure that the Senate’s proposal is defeated or revised to ensure homeowners do not foot the bill for the proposed tax cut.
You can find an opposition letter sent by NAR, the National Association of Homebuilders and the Mortgage Banker’s Association to Senate leaders HERE.
