A new law has passed that will directly affect every person seeking a mortgage securitized by Fannie Mae or Freddie Mac, or insured by FHA, effective tomorrow, 1/11/12. Nearly every loan right now is held by one of these Government-Sponsored Entities (GSEs), so this will affect almost everyone.
The Temporary Payroll Tax Cut Continuation Act of 2011, signed into law by President Obama on December 23, requires the Guarantee Fees charged by Fannie and Freddie to increase from what is currently being charged. What this means is that the charge will be passed directly on to you, as a consumer, which means that getting a loan will cost you more. Some of these charges will result directly in interest rate increases, so you will essentially be paying this fee over the life of the loan.
If you are currently locked in on a loan and need to extend your lock, this will affect you as well due to increased extension costs. What I find interesting is that this tax law has nothing to do with mortgages or the GSEs’ risk loss; it’s simply a way for the government to tax homeowners.
The Guarantee Fees will start increasing the closer we get to a certain date, which I believe is March 1, 2012, but some lenders are implementing the increases beginning tomorrow, depending on how long you need for your lock.
We’ll know more as lenders start implementing the increases. Some will try to soften the blow by taking on part of the increase fee; others will pass it on in full to you. So despite any market changes or improvements, this law will only aid in increasing overall fees and/or interest rates.
You can read the statement made directly by the Federal Housing Finance Agency here.
