Real Estate News with Terri Taydus, GRI, CNA

Housing Market to Pay for Payroll Tax Cut - How Does This Affect YOU?

December 18th, 2011 11:47 AM by Taydus Taydus

So apparently there is something Republicans and democrats can agree on: the housing industry is an easy target.

The latest proposal from both Senate Democrats and House Republicans to pay for the extension of the payroll tax cut calls for extra fees to be tacked on to what Fannie and Freddie charge lenders.

In Effect, this will create a new tax on home purchases, as the banks will pass those additional fees onto the borrowers, obviously. Just what we need in a struggling market.

Both parties like it because it’s seen as a politically painless way to avoid allowing the tax cut to expire going into an election year. Although it in effect creates another tax to pay for it, it’s just complicated enough that most people will miss it.

Copied in part from Jonathan Sweet’s post at www.housingzone.com

Congress and the Obama administration are considering having mortgage-finance giants Fannie Mae and Freddie Mac foot the bill for the proposed extension of the payroll tax cut, the Wall Street Journal reported on its blog.

Having Fannie and Freddie provide revenue would boost the fees that the companies collect from lenders. But builders, realtors and lenders say this would translate into a tax that would be passed onto mortgage borrowers and homeowners.

Copied in part from Mary Beth Nevulis’ post at www.housingzone.com December 15, 2011

So what does this mean to you Mr. & Mrs. Home Owner / Potential Home Buyer? If you are a current home owner, this means that should you chose to refinance and take advantage of the current low rates, you need to lock in your rate prior to January 1, 2012. Waiting until after the first of the year to lock your rate means that you will be paying for this tax cut via a higher monthly mortgage payment. If you are a new home buyer, the same applies to you. If you are on the fence about whether or not to commit to that special home you have had your eye on, now might be the time to pull the trigger, make an offer and lock in your loan.

The bill is being slid in on an election year where the maximum number of votes, both Republican and Democrat, are trying to be retained by passing a bill that will keep both sides happy. The bill points out that there will be two more months of Social Security tax cuts, and an extension of long-term unemployment benefits. It says that it will also delay cuts in Medicare reimbursements that are paid to doctors. All of this sounds wonderful and it is what people want to hear. What is not being said, or gets very little attention, is that it also gives a two-month extension to payroll tax…the very same payroll tax cut that was originally slated to be funded by increasing the tax on those that can afford it most – the top 1%. Under this new bill this extension will be funded by the imposed fees. This bill comes at the expense of you – Mr. and Mrs. Home Owner / Potential Home Buyer, because at the end of the day fallout from this “tax cut” equates to a new tax that will come at the expense of our already wounded housing market.

Posted by Taydus Taydus on December 18th, 2011 11:47 AM


I do not profess to be a Democrat or a Republican but I do not know how any middle class person or for that matter anyone that makes less than on million dollars could vote Republican. Our schools, roads, infrastructure, and welfare of the masses are in dire starits but yet the Republicans refuse to tax the top 1% of the population to help remedy the situation. Instead they elect to tax those of us who rely of real estate for our livelihood and those of us who need to secure mortgages to buy properties. Do you think that the top 1% have to finance their purchases so it is in essance a tax of the middle class with no impact on the rich. Even those in the top 1% like Warren Buffet and Bill gates acknowledge that the tax is necessary and that they are more than happy to pay the extra which to them is nothing. In regards to Mr Obama I would ask him who is in charge? Mr Boehner or himself? Why do the Democrats not do a better job of selling their position and why do they let Boehner bully them? This whole argument goes back to Al Gore and his infamous comment about "DOING THE MATH". He was ridiculed by the Republicans and the media but he was right then and he is right today. How can you decrease the deficit without increasing the taxes? By the way, the Republicans compalin about the Democratics spending but yet they are okay with the one trillion dollars waste don the war in Iraq. Go figure.
Posted by Joe Taydus on December 19th, 2011 9:09 AM


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