Senate plays kick the can with flood insurance program again

 Regulations, Residential Mortgage  1 Response »
Jul 162018
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

It feels like deja vu all over again. The National Flood Insurance Program (NFIP) will expire on Jul 31 unless Congress acts to extend it. The program currently is operating on a short-term extension passed in March.

In Nov, the House passed a package of bills that extended the program until 2022. However, they included reforms, including the expansion of private flood insurance to compete with the federal program. While most recognize the program needs to be reformed, the Senate wasn’t comfortable with the scope of the House vision.

Without its own NFIP reform bill, the Senate has opted to kick the can down the road one more time. It slipped another short-term extension into the Farm Bill passed at the end of Jun.

Unfortunately, the Senate version of the Farm Bill differs significantly from the House version. The two bills now go to conference committee to find a compromise that can pass both chambers. The problem is compromise could take a long time, and the clock is ticking on NFIP.

If Congress fails to extend the program, it would have to stop issuing and renewing policies. Realtors estimate this could impact as many as 40,000 loan closings each month.

Congressmen and Senators, especially those from coastal areas, are well aware of what a disaster that would be, especially with the onset of the hurricane season. I wouldn’t be at all surprised to see Congress strip the extension from the Farm Bill and pass a standalone bill just in the nick of time.

Senate considers tax on homeownership

 Residential Mortgage  Comments Off on Senate considers tax on homeownership
Jul 292015
 

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

This really gets my knickers in a knot. The Senate is again considering using fees on Fannie Mae and Freddie Mac mortgages, which represent the majority of market, to fund its spending plans. The Guarantee Fee or “g-fee” is charged by Fannie and Freddie to compensate it for the risk associated with guaranteeing a mortgage. In 2011, Congress raised the fee by 10 basis points to pay for a payroll tax break. This time, the Senate wants to extend the fee hike for 4 more years to help pay for transportation funding.

This is an easy move by the Senate because homebuyers generally are unaware of this special tax. There isn’t a “g-fee” line on the closing statement. Instead, the fee is reflected in the interest rate. What the homebuyer sees is a slightly higher rate or slightly higher closing costs. Either way, it acts as a tax for as long as the homebuyer owns the home.

So far, the House is pushing for a temporary extension of existing transportation funding and hasn’t agreed to the Senate’s fee increase. However, given the invisibility of the tax, it wouldn’t surprise me to see the House go along.