Congress Still May Tax Mortgages to Pay for Highways (9/30)
Back in July the U.S. Senate passed a long-term Transportation funding bill that includes a tax on mortgages to pay for the construction of highways. To make it more palatable to Republican lawmakers, this tax has been disguised as a “fee.” This tax isn’t small potatoes either. On a median priced home in California, homeowners could pay over $8,000 for this tax.
While the Senate has passed its version of the long-term Transportation bill, the House has merely passed a short-term version to keep the federal Transportation Department open. The House plans to pass its own version sometime this fall, but there’s no guarantee that this new tax won’t be included in that version.
The California Association of REALTORS® is actively opposing this approach to paying for the highway bill and is encouraging the public to get involved. People are urged to visit www.nomortgagetax.org and go to the “Take Action” tab to send a personal message to Congress to oppose the tax. The public can also get updates on Facebook at www.facebook.com/no.mortgage.tax or follow the campaign on Twitter™ at @NoMortgTax.
Under current law, a portion of every conforming loan, (those backed by Fannie Mae and Freddie Mac) includes a fee used to offset losses from bad loans and to pay for the administrative costs of running these companies. These are called guarantee fees (or g-fees). In 2011 Congress added on an additional.1% increase on the interest rate of every Fannie and Freddie mortgage to fund a six month extension of unemployment benefits. That “add on” was due to expire in 2021 and loans originated after that date would not be subject to the additional fee.
The U.S. Senate’s highway bill extends the “add-on” fee until 2025 for all new mortgages in order to pay for transportation infrastructure. As an example using real numbers, buyers purchasing a median priced home of $489,560 using a typical conforming loan with a 20% down payment will pay an additional $8,100. This figure is sure to rise with an increase in sales prices.
The California Association of REALTORS®, believing the guarantee fee should only be used for its intended purpose, and continues to oppose this funding mechanism.