President Obama Speaks on the Payroll Tax Cut~ In exchange for a two-month tax cut, the Senate on Saturday approved a permanent increase in fees attached to mortgages backed by Fannie Mae, Freddie Mac and the Federal Housing Administration ~ When mortgage rates fall to record low what does this mean to you?


  Hi, Jean Robb here. This is a very confusing time for home owners and buyers that are considering the purchase of a new home. Let's see how the  Payroll Tax Cut will effect the housing market. Below are two stories posted this week. With mortgage rates at an all time low all this makes me think about the effects on the market in 2012 . Looks like at the end of the day the gain and loss will be a wash!

Mortgage Fees Would Rise Under Payroll Tax Cut Deal

Published December 17, 2011


Homebuyers, beware. 

In exchange for a two-month tax cut, the Senate on Saturday approved a permanent increase in fees attached to mortgages backed by Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA).  The fee hike would apply to new mortgages and new refinances, and would last for the life of the loans. The increase is meant to pay for the roughly $33 billion package the Senate approved Saturday to extend a 2 percentage point payroll tax cut for another two months. The Obama administration says 160 million people benefit from that tax cut. 

But the mortgage fee provision would have widespread long-term impact, considering nine out of 10 mortgages go through one of the three government-sponsored finance organizations affected.  The new fee increase would amount to about $15 a month more for a $200,000 mortgage, according to a senior Democratic official.   That's $180 a year, or $360 a year for a $400,000 mortgage. Homeowners would have the fee hike built into their loan -- the mortgage provider would then send that extra revenue to the Treasury.  The idea behind the fee is to encourage more homeowners to get into the private market, as opposed to seeking loans backed by troubled entities like Fannie and Freddie.

"Taxpayers are losing every quarter on Fannie and Freddie," a senior Senate Democratic aide said. "We want to lessen the burden on the taxpayers (who are on the hook for failed government-backed loans)." The aide added, "This is an incentive to go to the private-sector mortgage market."  A fact sheet on the Senate bill sent out Saturday to House Republicans noted that the offset has "bipartisan support" and was included in the House GOP-backed payroll tax cut bill. It also was included in President Obama's list of suggestions to the now-defunct "Super Committee" tasked with reducing the deficit.  The House still must vote on the bill. The two-month tax cut is estimated to be worth about $165 for someone making $50,000 a year.  While lawmakers will say that the mortgage fee hike means the payroll tax cut is fully paid for, the timetables for the tax cut itself and the revenue from the fee are very different. The Congressional Budget Office estimates that while the tax cut lasts two months, it will take 10 years for the associated fee hike to drum up an estimated $35.7 billion and replenish the lost revenue. That rhetorical tactic is common on Capitol Hill -- lawmakers frequently say bills are "paid for" when in fact it takes a decade for that to be the case. Fox News' Trish Turner contributed to this report. 

Mortgage rates fall to record lows

@CNNMoney December 15, 2011: 1:44 PM ET

 mortgage rates


NEW YORK (CNNMoney) -- Mortgage rates sunk to record lows again this week. The average rate on the 30-year fixed mortgage fell to 3.94%, matching the all-time low hit in early October, according to Freddie Mac's weekly mortgage rate survey. Meanwhile, 15-year fixed-rate loans hit a new record low of 3.21%, surpassing the record set on October 6. Five-year adjustable rate mortgages also plumbed new depths, hitting 2.86% for the week."We've been hanging around record lows for a few months now and we finally hit another one," said Keith Gumbinger of HSH Associates, a provider of mortgage data. Low-interest mortgages will be available at least through mid-2012, according to Freddie Mac's chief economist, Frank Nothaft. according to Freddie Mac's chief economist, Frank Nothaft.

Where homes are affordable

The low rates can translate into big savings for home buyers. Five years ago, a home buyer would have been lucky to land a 5% rate on a 15-year loan. On a $200,000 mortgage, that would have meant the borrower would have paid $1,582 a month. Should a borrower land a 3.2% rate on a $200,000 loan now, the monthly mortgage payment would come to $1,400 -- a savings of $182 a month. Mortgage rates tend to closely track Treasury bond yields, which have also been very low lately. For the past three months, 10-year Treasury notes have often fallen below the 2% mark as bond investors steer clear of Europe and its debt woes and buy U.S. Treasuries instead. Europe and its debt woes

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"There's been a flight to quality out of Eurobonds and into Treasuries," said Gumbinger. On Thursday, the 10-year Treasury stood at 1.92%. The rock-bottom interest rates, combined with the lowest housing prices in years, have made home buying extremely affordable right now. Although most borrowers are looking to refinance existing loans rather than buy.

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Last week, mortgage applications climbed 4.1%, driven by a surge of home buyers trying to refinance to record-low rates. According to the Mortgage Bankers Association's latest Market Composite Index, close to 80% of loan applications were to refinance existing loans.


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