New Home Mortgage Fee: Congress Passed It. Why?

This story didn’t make much of a ripple last week after a CBS online article because it was already old, depressing news and long-forgotten, if indeed it was ever known by anyone outside of Congress. The new fee on Fannie Mae and Freddie Mac mortgages was passed by Congress in December 2011 to raise some $35.7 BILLION to replace the November payroll tax cut. Fortunately for Congress, we were watching our wallets for mall thieves in December, but not thieving CongressCritters.

Congress has the authority, and used it, to set up a hefty fee on every new Fannie Mae and Freddie Mac mortgage for the next ten years, to span the 30-year life of the loan. Here’s how it works: both you and your employer pay equally into your Social Security account. In an ideal world, in a representative republic, and with honorable representatives, those monies would go into the Social Security Trust Fund, gathering interest every day as you grow older – ready and waiting for you when you reach retirement.

But in this world, Congress long ago violated the Trust Fund and the trust of the American people, and began spending your money, reasoning that a IOU dropped in the till is sufficient.

Then with elections less than two years away and a tanked economy, after even more egregious behavior like insider trading, wild wild spending, abdicating numerous Congressional obligations to Obama and passing ObamaCare – knowing full-well it is unconstitutional, the idea to give “the people” back some of their hard earned money became an urgent mission. Instead of taking the $40 out of your monthly paycheck, Congress would forgive it, let you keep it, more than once and for more than a few months, but your employer still had to pay in his/her portion into your account – which doesn’t go into the Trust Fund but directly into the U.S. Treasury General Fund to be spent, because we always spend every penny we have and then we borrow more.

The date for the onslaught of the fee of about $15 on every $200,000 borrowed was to begin in April 2012 and go through October 2021, but some lenders are already tacking on the charge in anticipation of the number of months it takes to actually close a loan to comply with every government regulation (with the exception of actually qualifying for the loan with a good credit score and a decent down payment – because Congress no longer cares – you deserve that house and you shall have it).

CBS asked Speaker John Boehner (R-OH) what the heck they were thinking when this nasty legislation passed. Boehner allegedly blamed it on the Senate, but the House voted too, and passed it. How many Republicans had to be whipped to come to submission on this one?

We’ll never know because H.R. 3764 – Public Law 112-78 passed with no objection, “A record of each representative’s position was not kept.”

A December 2011 CBS article said this:

Had Congress failed to act, some 160 million Americans would have seen the payroll tax, which funds Social Security, increase from 4.2 percent to 6.2 percent. That increase would have meant a typical family making $50,000 a year would have lost about $40 from each paycheck.

Very clever, but it’s a clever lie. The so-called Payroll Tax Holiday began sometime in 2010. Your payroll deduction by law is 6.2%. When the ‘holiday,’ now known as a ‘tax cut,’ went into effect we were contributing 6.2%. Today we contribute 4.2% – and Congress has less to spend – thus the mortgage fee. Had the holiday taken a holiday and the 6.2% contribution been restored, it would not have technically been an increase – but simply a return to law.

When Congress forced their Community Reinvestment Act (CRA) on lenders, the housing market went wild because every “no-credit, no-job, no-down-payment” applicant got a house because they deserved it, in the view of Democrats in the House and Senate. It was a seller’s market for a few years, and lenders let the slackers buy homes priced far beyond their real worth, and definitely beyond their means to make payments.

The result was life-changing for the neighbors. When the buyer, having no equity simply walked out, and the bank foreclosed and sold the homes egregiously below market, millions of homeowner-worth was wiped out. It’s one of the most disgraceful acts of leadership in this country’s history.

Who are these people in Congress who think it appropriate to now charge an extra $40-$80 A MONTH FOR THE NEXT THIRTY YEARS to fund their own spending sprees? It defies any explanation other than greed.

Here’s a lie, a damned lie:

To be fair, thus far the payroll tax holiday hasn’t impaired Social Security’s fiscal resources one bit. By law, 100% of the cut must be compensated for by transfers from the general fund; those transfers have come to about $130 billion since 2010, covering the original “temporary” one-year holiday and a two-month extension passed late last year. LA Times, February 19, 2012

There is nothing in the Social Security Trust Fund but the lousy IOU. That’s why you are hearing that Social Security is on the brink of bankruptcy – a bankruptcy without any assets. Do you think we would be hearing about the accursed ‘entitlements’ and Social Security not being there for you, if the law can kick in and make the Trust Fund magically appear all fat and healthy and ready, willing and able to put your check in the mail for years to come? If the cost of the Payroll Tax Cut of $130 BILLION is accurate, and the estimated $40 monthly to each recipient is accurate, your country has taken on huge debt to give you about $560 TOTAL for 16 months.

Your CongressCritter thinks you adore him/her for the extra $40 in your paycheck that now goes directly into your gas tank, thanks to the Obama no-oil-no-gas-no-coal policy. There is nothing in your Social Security Trust Fund. Ignorant voters are ready to vote their Democrats back into office. Republican voters are waiting for the next wave of Tea-Party-type conservatives to replace the foolish fossils still firmly entrenched in the U.S. House.

The question remains: if a tax cut for “the people” is on the table, why not affect a real and permanent tax cut by cutting spending somewhere and returning the money to “the people?” Vicki McClure at Frugal Cafe has thoughts about the irony of these “cuts,” and thanks to brilliant cartoonist Mike Lester at the Rome News Tribune.

Posted by Maggie @ Maggie’s Notebook



  • Who Won

    EXCELLENT article Maggie! I shared on FB.

    • Who Won, thank you very much!

  • We are so screwed!

    • sandstone, yes – they just won’t quit.

  • Who Won

    I also sent a link to this to my House rep, I usually hear back from him. If I do…I’ll send to you.