COST OF PAYROLL TAX CUT IS REAL
HOORAY!!!!!!!!! It appears the payroll tax cut has been extended for two months. The bad news is as I mentioned in an earlier blog the Senate bill had provisions for increased fees at Fannie, Freddie and FHA to "pay for" the tax reduction. The House has agreed to this.
As an example on a FHA loan the monthly MIP is 1.15%. To pay for the tax cut, it would go up 10 basis points to 1.25% a month. On a $100,000 loan this makes the monthly MIP $10.00 more, $120 more annually, and over ten years $1200.
Take this times the numbers of people who will get FHA loans and in ten years that is a lot of bread! I don't see how Fannie and Freddie won't look similar when it comes down to it. They are not going to pay the government funds they can't recoup, especially when they are broke.
Everyone should give the home buyers and refinance-rs a big old pat on the back for putting the extra dough in their pockets.
