The Real Deal Miami

Bipartisan support for Fannie, Freddie funding of payroll-tax cut

December 12, 2011 04:19PM

In the latest twist resulting from federal ownership of mortgage insurers Fannie Mae and Freddie Mac, House Republicans and Senate Democrats agree that the companies should increase their fees to fund a payroll-tax cut extension. According to the Wall Street Journal, democrats are calling for a one-eighth of a percent fee increase while republicans propose a one-tenth of a percent increase.

Fannie and Freddie currently charge about one-quarter of a percent fee to lenders when they buy loans, and lenders typically pass that cost along to borrowers. Real estate brokers fear that this would further harm the fragile housing market.

“Congress is essentially proposing to raise taxes on millions of potential home buyers in order to pay for a payroll tax cut and other non-housing legislative initiatives,” said National Association of Home Builders Chairman Bob Nielsen in a separate statement released to the press. “With the housing market struggling to regain its footing, such a short-sighted move would be extremely counterproductive and threaten the fragile economic recovery.”

But supporters note that with mortgage rates already sitting at historic lows, small increases would have little affect on the health of the housing market. Plus, the increased cost of a Fannie or Freddie-backed mortgage could help pave the way for private lenders re-entry into the mortgage market — a long-standing goal of the Obama administration. [WSJ]