Congress Might Tax Mortgages to Pay for Transportation

This week Congress passed a short-term, three-week extension of the Highway Bill that will expire on November 20th.  The current funding authorization would have expired on Thursday 11/29.  Lawmakers said they needed this extra time to hash together a 6-year funding bill from different versions being considering in each chamber.   The Senate’s current version of the bill (which passed in July) is over $16 billion larger than the current House version which has cleared committee but has not come up for a full vote.

Both versions of the bill use different funding methods and tap various sources of revenue – some of which are not related to transportation at all.  Traditionally, transportation funding came from revenue generated by the federal tax on gasoline (currently 18.4 cents/gallon) that brings in approximately $34 billion per year.  The problem is, the federal government spends more than $50 billion per year on “transportation” projects.

Here’s where it gets interesting….and the proverbial barn door starts to open.

Back in 2011 Congress added an additional 10 basis points to the guarantee fees (g-fees) included in every mortgage backed by Fannie Mae and Freddie Mac in order to fund a 6-month extension of unemployment benefits.  This fee was set to expire in 2021.  By law every conforming loan must include a fee to offset losses from bad loans and to administrative costs associated with these two behemoths.

However, this past July, the Senate included a provision in their 6-year Highway Bill to extend that fee (tax) to help fund transportation infrastructure and extend that fee until 2025!

This fee is nothing more than a stealth tax on home buyers and it absolutely has nothing to do with guaranteeing the risks involved with their mortgage.  Now that the barn door has been opened, lawmakers see an opportunity for an even greater revenue grab at the expense of home buyers across the country.

As it stands now, the House and Senate versions of the bill will be reconciled and voted on by both chambers sometime within the next three weeks…..Possibly very soon.  Real Estate Investing Today will follow this situation as it develops.

In the meantime, listed below are some recent articles & commentary about the federal highway funding bills:

Disguised Mortgage Tax on Horizon for Homeowners, Noozhawk, 9/20/15

Don’t tax mortgages to pay for highways, Orange County Register, 10/22/15

Three Months of Work to Write a Three Week Bill, the Cato Institute, 10/28/15