before the end of the year congress and the president agreed to extend the payroll tax cut. in that bill there were two items of interest for those involved in real estate. i seem to remember hearing the president admit that a healthy real estate market is what our country needs to turn things around…….what you are about to read may make you scratch your head a bit…..
1. the HIKE in the Guarantee Fees charged by the government sponsored entities (GSE) Fannie Mae and Freddie Mac
the 10 basis point increase in the fees has translated to a .375% to .5% increase in mortgage rates for conventional loans. many customers who stared their loans a couple of months ago are being ‘surprised’ with higher than expected rates. especially with everything you read in the papers that say rates are at historic lows and will likely stay put through 2014!! many consumers feel as if their lender is being unscrupulous. however, your lender has fallen victim to the increase in Guarantee Fees and how the secondary market is passing along the cost. what looks like possible lender greed is just a passing on of the increased expense imposed by the gov’t. sadly, the increased revenue isn’t even being used to help aid an ailing Fannie or Freddie – it’s being turned over to the US Treasury to cover the temporary extension of the payroll tax cut.
2. Permission for HUD to increase the insurance premiums they charge on FHA loans
HUD charges TWO insurance premiums on FHA loans – a monthly one and an up-front one that is usually added into the loan. most recently they reduced the up-front mortgage insurance premium (UFMIP) and dramatically raised the monthly fee (MMIP). it is widely anticipated that, as soon as April, we will see a hike in the Up-Front MIP with NO adjustment to the monthly MIP. while this will help shore up the reserves in the insurance fund, it will simultaneously make buying a home a little more expensive. no one knows the effective date or amount of the increase just yet. buyers should look to buy before the increase in fees.
it’s interesting to me….we hear how our gov’t tucks away things in their bills…well, in this case, while the headlines praised Washington for preserving the payroll tax cut, they may have hurt us more in the long run.