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Why Are Mortgage Interest Rates Going Up? It's Not What You Think!
Remember last month when President Obama and Congress were arguing over extending the Payroll Tax Cut?
Did you hear anything in the news about how the Payroll Tax Cut was going to be paid for? Probably not.
Guess where the money to pay for the tax cut is coming from? If you guessed the housing and mortgage industry and specifically people borrowing money through Fannie Mae (Fannie), Freddie Mac (Freddie) and the Federal Housing Administration (FHA) you would be right.
As everyone knows the housing market has been struggling. This new legislation has imposed what is in essence a tax on every borrower who gets a loan that is guaranteed through Fannie, Freddie or FHA.
In an article titled Washington Wades Deeper into Housing Bloomberg Businessweek said that "An 11th-hour extension of the payroll tax cut, signed into law on Dec. 23, will for the first time divert funds from Fannie Mae (FNMA) and Freddie Mac (FMCC), the two mortgage finance companies under U.S. conservatorship, to pay for general government expenses."
The increased costs are also being passed along to borrowers who get FHA loans. OurBroker.com recently published an article "FHA Mortgage Insurance Premium To Rise In 2012"
Here's a recent recent commentary by Brian Stevens and Frank Garay of THINKBIGWORKSMALL:
Effectively, that means that all Conforming loans will increase almost 0.125% in interest rate. With FHA you will see and increase in the Mortgage Insurance Premium (MIP). It could be in the monthly MIP, Upfront MIP or both.
It's been estimated that it will require 10 years of the increase in rates to pay for the two months of benefits provided by this "Payroll Holiday."
So, the temporary decrease in the payroll tax was supposed to help the middle income American taxpayer. Looks to me like the government just dipped there hands in their pockets without telling them. And whens the last time you saw a temporary increase in fees get rescinded. It seems once they get on the books they never go away!
I'd like to know what you think. Please comment below.
Your source for Conventional, FHA and VA loan information.
My direct line is 240.813.0614. So let me hear from you! Remember...it doesn't cost a penny to talk...so call right now and I will answer all your questions.
Alan Gross
Senior Mortgage Consultant
PrimeLending, A PlainsCapital Company
704 Quince Orchard Rd., Suite 230
Gaithersburg, MD 20878
Home Office: 240.813.0614
Email: agross@primelending.com
Web: www.mtg-info.net
Web: www.DCMilitaryVALoans.com
NMLS#217388
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