- - Thursday, January 26, 2012

I’m off to New Orleans for a long weekend and am filing my column early, much to the delight of my editor, who can attest to the fact that I’m usually late. New Orleans seems like a fun place to celebrate my 25-year wedding anniversary.

To the readers, thank you for your emails, questions and compliments. My feedback has surged in the past few months, undoubtedly a result of the fall in interest rates. Unfortunately, we’re still waiting on any real reaction to the Home Affordable Refinance Program (HARP) modification and some of the other issues I’ve been writing about.

Today, let me touch on the payroll-tax-cut extension, which will, believe or not, affect all mortgage seekers.

The little-publicized increase in the guarantee fee charged to mortgage giants Fannie Mae and Freddie Mac is linked to the tax cut, which certainly makes it worth a discussion.

I’ve been too busy to really investigate this, but the gist is that the cost to obtain a mortgage will be increasing by .10 percent by the time this column is published.

According to various online reports, the Obama administration is imposing an increase of 10 basis points, or .10 percent of the loan amount, on all loans sold to Fannie and Freddie. This apparently will help pay for the extension of the payroll tax cut.

I’ll look into this further, but the bottom line is it seems that interest rates for mortgages will rise slightly, even if the market forces are unmoved. Ten basis points in fee isn’t a lot - $1,000 on a $100,000 loan. So expect to pay $1,000 more (or pay a slightly higher interest rate) if you lock your rate in February rather than January.

Why doesn’t this bother me? Because rates move daily, sometime hourly, certainly in increments of $1,000. Next October, rates will be where they are going to be, but they likely will be slightly higher than they would have been had the increase in the guarantee fee not been implemented.

The only question I have is the same issue I’ve brought up before: consistency. The Federal Reserve Board has made extreme efforts to bring down long-term interest rates in order to spark the housing market, lower household payments and infuse money into the economy.

Now we have a program that raises rates. It’s inconsistent, as are Fannie and Freddie’s unreasonable underwriting demands, which are preventing qualified homeowners from taking advantage of today’s low rates.

Political and legislative gridlock: It’s akin to digging a hole and filling it back up again.

Send email to henrysavage@pmcmortgage.com.



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