Call-For-Action: Tell Congress No Mortgage Tax in Transportation bill
C.A.R. Opposes Mortgage Tax
C.A.R. is opposing a provision in the Senate version of the long-term Transportation bill that creates a new tax on mortgages to pay for transportation infrastructure. While the U.S. Senate has already passed the bill, the House has not passed its version of the legislation.
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Ask your Representative to OPPOSE efforts to fund transportation with a mortgage tax!
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A portion of every conforming loan, (those backed by Fannie Mae and Freddie Mac) is 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 a tax of an additional 10 Basis Points, equal to .1% of the value of the loan, to the guarantee fee of every new loan to fund an extension of unemployment benefits. That “add on” tax was due to expire in 2021 and loans originated after that date would not be subject to the additional fee.
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 California home of $489,560 using a typical conforming loan with a 20% down payment and a 4% interest rate will pay an additional $8,100. This figure is sure to rise with an increase in sales prices. This “fee” is actually a disguised tax on homebuyers.
C.A.R. Opposes this Tax Because:
- It’s a mortgage tax, pure and simple. Congress may want to call it a fee, but it’s used for purposes unrelated to the mortgage, and is a tax. It’s disingenuous to say otherwise.
- The g-fee should only be used for its intended purpose. G-fees are meant to reduce Fannie Mae and Freddie Mac’s (and therefore the taxpayers’) exposure to the risks associated with guaranteeing a mortgage and for the operation of these companies. G-Fees are intended to act like mortgage insurance – This money should not be siphoned off for the general fund.
- It’s a tax on homebuyers. While everyone would benefit from improved infrastructure, not everyone pays. A significant portion of the cost would be borne only by those purchasing homes using a conforming loan. Traditionally, gas taxes have borne the burden, and are a fairer mechanism.
- It will make mortgage finance reform more difficult. By extending this tax on homebuyers, Congress will only make it more difficult to reform the mortgage finance system. This is because any subsequent bill that changes Fannie Mae and Freddie Mac would “cost” the Treasury money and Congress would have to find an offset for that cost.
- It will further erode housing affordability. In most areas of California, purchasing a home remains unaffordable to many. Adding yet another cost, in the form of this tax, to homeownership will prevent even more families from owning a home. Adding another $8,000 or more to the median priced home will price thousands of prospective homebuyers out of the market.
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