The cost of recently passed legislation that extends a payroll tax cut will be paid by borrowers on agency loans, and Freddie Mac is now notifying its approved sellers of increased guarantee fees.
On Dec. 23, 2011, the Temporary Payroll Tax Cut Continuation Act of 2011 was signed into law by President Obama.
The law temporarily continues the reduction of the Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid through today.
Around 160 million workers are impacted from the reduction.
Section 401 of the act requires borrowers on conventional agency loans to foot the bill for the lost payroll taxes.
So the Federal Housing Finance Agency on Dec. 29 directed Freddie and its government-controlled cousin Fannie Mae to increase their guarantee fees by 10 BPS on all mortgages delivered for inclusion into single-family mortgage-backed securities pools.
McLean, Va.-based Freddie issued Bulletin No. 2012-6 on Wednesday advising sellers of the increased fees.
“Required spreads that are subject to other add-ons or adjustments and required spreads that are determined based on a calculation or methodology stated in the seller’s master commitments,” the bulletin stated.
The higher fees impact loans with settlement dates on or after April 1.
Freddie said it is commensurately adjusting the pricing for loans sold under the cash program.
The increase applies to loans sold under the guarantor and multi-lender swap programs.
There is no impact to any maximum buyup amounts, though any “required spread” or “maximum buyup value” outlined in master commitments will be increased by 10 BPS.
