How can the payroll tax-cut extension affect real estate in Kansas City?

Senate Democrats and House Republicans proposed a plan to pay for the proposed payroll tax-cut extension. Their plan will increase  the "guarantee" fees that Fannie Mae and Freddie Mac will charge mortgage lenders.

The government-sponsored enterprises, Fannie Mae and Freddie Mac, use the guarantee fees to cover defaulted mortgage loans they buy from mortgage lenders.

How will increasing the guarantee fee affect real estate in Kansas City?

It is believed that mortgage lenders will pass the increased fees to mortgage borrowers, thus increasing the expense to buy a home in Kansas City.

Last year, the fees averaged about 0.25% of the loan amount. The Senate proposal raises the fees by at least 0.125% over the next two years. The House proposal calls for an increase of 0.1% over the same period.

The proposal would send the fees to the Treasury Department, when right now the GSEs receive the fees.

The Mortgage Bankers Association, the National Association of Realtors, and the National Association of Homebuilders told lawmakers that redirecting revenue from Fannie and Freddie for purposes unrelated to the health of the housing finance system is counterproductive.

Reacting to the proposal, MBA CEO David Stevens Saturday tweeted, "payroll tax should not be paid for with GSE fees. That is a slippery slope."

Do you think that increasing guarantee fees is a good thing? Should fees to buy a home be raised right now in this economy?

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Blog post written by the Dowell Taggart Team of RE/MAX Premier Realty 

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