Skip to comments.Mortgage Spreads Highest Since 2008, Even Before Payroll Tax On Mortgages Go Into Effect
Posted on 01/31/2012 12:03:38 PM PST by whitedog57
On December 29th, 2011, the Federal Housing Finance Agency (FHFA) acting director Edward Demarco released a statement detailing the increase to the guarantee fee charged by Fannie Mae and Freddie Mac, as part of the Temporary Payroll Tax Cut Continuation Act of 2011. As part of the legislation, FHFA is increasing the guarantee fee by no less than 10 basis points (bp), effective April 1st, 2012. This increase affects all single-family residential mortgages, and the additional 10 bp in fees will be remitted to the U.S. Treasury instead of being retained by the GSEs. Additionally, the minimum initial increase shall be 10 bp, with the plan to have that number rise over a two-year period per a schedule to be determined after FHFA conducts more research on the subject.
While the increase in guarantee fees seems fairly small, it is a step towards using the taxpayer-held Fannie Mae and Freddie Mac as the Potomac Piggy Banks for more government spending.
But if we look at the spread between the Mortgage Bankers Association average mortgage contract rate and the Fannie Mae 30 year current coupon rate (the coupon rate for MBS), you can see that it is the highest since 2008. And the 10bp G-Fee increase hasnt gone into effect yet.
Chairman Bernanke did signal higher risk in the economy when he announced that the Fed Funds target would be held at 0.25% until 2014.
Stated even differently, the government wants you to refinance say they can save you $400 dollars for two months of payroll taxes, so they can charge you $4,000 dollars extra on your refi.
Typical government math, borrow money for two months and take 10 years to pay for it.
All the while, “helping” out our citizens.
Refinancing under HAMP or any Obama program has always been a game rigged to favor the banks.
If this was REALLLY about saving homes the government would have been better served by giving a “coupon card” credit to pay down these inflated loans.
(inflate the property = inflate the loan = inflated default value = inflated bundle = 16 TRILLION deficit)
The only way to clear the books is to literally crash the value of real estate to what the market can pay. Even allowing bankruptcies to revalue homes to secured and unsecured parts ala investment property.
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