Little known fee on mortgages is part of payroll tax cut law

Last month’s flap over extending the federal payroll tax cut was resolved by extending the break for a couple of months.  But a little known provision of that bill places a fee on some mortgages that will make its way down to the home buyer.  That fee has largely flown under the radar.  Way under the radar.”In my experience, it doesn’t appear that many people that do what I do are aware of this particular change,” says  Craig Smith, a mortgage banker with Mortgage Master Inc.”When it was released, it was kind of burried in page three of the rhetoric that was going on in Washington about the extension of the tax cuts.”Part of the reason it’s not widely known, according to Smith, is that it’s small.  It’s difficult to say exactly how small, though, because the fees aren’t directly charged to consumers.  Instead, the U.S. Treasury is charging a fee to the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac.  Eventually, those costs will trickle down to mortgage bankers like Smith, who in turn will pass them on to  borrowers.”What we have seen on the secondary mortgage market,” says Smith, “is an increase in fees that we are charged by 65 basis points, which if you’re going to monetize that in an interest rate, it’s about 1/8 of a percent in interest rate.”For someone buying a $200,000 house, Smith  estimates that fee would work out to around $360 a year.  Still, Smith isn’t worried.  He says economic factors are likely to play a bigger role in the housing market than the fee.”One good economic report that comes out, if that changes the Wall Street impression as to the future of the economy, we could see 1/4 of a percent or 1/2 of a percent jump in interest rates on the same day.  Way more than this particular fee,” he says.In contrast to the national trend, the regional housing market is doing reasonably well.  So says Pam Thistle, a realtor with Prudential, Fox, and Roach.”The buyers who have real information, not information that’s fed to them through reading a story or talking to people, but when they actually do it, it really is an amazing time to buy,” she says.That’s due in part to historically low interest rates hovering just under 4 percent.  But Thistle says the message the government is sending by imposing even a small fee could hurt the market.”It’s not so much the number, it’s just the perception of oh, it’s hard to get a mortgage, or oh, it’s expensive to do this,” says Thistle.  “So I think that getting that message out there if it does happen, that it’s not really that much, is what has to be done.”Even though the fee is low right now, the law does open the possibility of increasing it in the future.