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Homeowners to Pay For Payroll Tax Cut Extension [UPDATE]

Happy holidays! We thought we would try a slightly different format this week. Let us know if you like the presentation.

Senate pays for payroll tax cut on the back of homeowners

[UPDATE: The House voted against this bill, so we are back to the drawing board. The following information will not apply, but is still an interesting proposal that may continue to come up in discussion.]

Over the last few weeks, we have been hearing quite a bit about the expiration of the payroll tax cut.  The Senate renewed the lower rate, but it came with a price tag for homeowners. To pay for the $33 billion 2-percent payroll tax cut over the next two months, the Senate approved an increase in fees for mortgages backed by Freddie Mac, Fannie Mae, and the Federal Housing Administration (FHA).

The fee increase amounts to $15 a month more for a $200,000 mortgage ($180 a year) and $30 more for a $400,000 mortgage ($360 a year) and is built into the loan.

In addition to paying for the tax break, the fee is used to incentivize homeowners to get into the private market. Nearly nine in 10 mortgages are backed by a government sponsored finance organizations.

The two month savings for the cut is estimated to be $165 for someone making $50,000.


European debt trouble alarms markets
And now for your weekly “Europe debt issues” update – Fitch ratings announced it was considering cuts to the credit scores of Italy, Spain, Belgium, Cyprus, Ireland and Slovenia. Additionally, we received news that Ireland’s economy shrunk, France faces a recession next year, Spain struggles to cut its debt, and bankers and hedge funds are balking at forgiving Greek debt for the purpose of a bailout.  The market responded in kind with drops and general volatility.


Generally positive jobs statistics
California’s unemployment rate dropped to 11.3 percent last month, which is its lowest since May 2009. The number is somewhat misleading, however, as the state only added 6,600 jobs. Much of the drop can be attributed to the unemployed leaving the workforce, and so are no longer counted under the metric.

Nationally, the jobs outlook is a bit better. We added 100,000 jobs for a five-month stretch from July through November for the first time since 2006, and more companies are planning to add jobs since 2008. Jobless claims dropped by 19,000 to 366,000 in the week ending on December 10 for the lowest level in 3 years.


SEC announces lawsuit of ex-Freddie and Fannie executives
The Securities and Exchange Commission decided to bring a lawsuit against six former top Freddie Mac and Fannie Mae executives for misleading investors about exposure to subprime loans. The action amounts to fraud charges for authorizing misleading statements about balance sheets.


Refinance activity increases
Last fall, interest rates took a plunge to some of the lowest ever and then shot up by Christmas time. This year, rates once again hit new lows, but with Christmas just under two weeks away, we are bucking the seasonal trend and still seeing historically low rates. Accordingly, refinance activity increased 9 percent last week.


Interest rates remain low for the holiday season

30 Year Fixed 3.750 percent (3.884 percent APR), 15 Year Fixed 3.250 percent (3.489 percent APR), 30 Year High Balance 3.750 percent (3.968 percent APR), 30 Year FHA 3.5 percent (4.543 percent APR), 30 Year VA 3.5 percent (3.736 percent APR).


Written by Central Coast Lending - Go to Central Coast Lending's Website/Profile