No Mortgage Tax


Congress wants to tax mortgages to pay for highways

Do you ever wonder how Congress pays for the spending bills it enacts? In the case of the long-term Transportation bill that the Senate recently passed, a new tax on mortgages has been created and disguised as a “fee.”

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 10 basis points, equal to .1% of the value of the loan, to the guarantee fee of every new loan 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.

Now the U.S. Senate just passed a long-term transportation funding bill that 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.

This “g-fee” is actually a disguised tax on homebuyers. That “fee” has NOTHING to do with covering the costs and risks of the homebuyer’s mortgage and is therefore a tax.

While the Senate has passed its version of the 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®, believing the guarantee fee should only be used for its intended purpose, steadfastly opposes this funding mechanism and urges its members and the public to contact Congress today to oppose a mortgage tax.