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Don’t tax mortgages to pay for highways

The House Transportation Committee has scheduled a hearing today on a long-term transportation funding measure. The American public needs to be aware that, in a closed-door, 11th-hour deal, members of the Senate inserted a tax on homebuyers in their version of this bill.

The senators cleverly buried in more than 500 pages of bill language a single sentence referring to a fee. Apparently, they believe that, by imposing this so-called fee, they can claim to have funded the nations highways without raising taxes.

The problem is that this fee forces lenders to charge homebuyers a higher interest rate when they obtain a conventional mortgage (one backed by Fannie Mae or Freddie Mac) or when they refinance with a mortgage of this type. For example, under the provisions of this bill, a family purchasing a median-price Orange County home with a 30-year conforming mortgage would pay a highway tax of more than $11,800.

Thus, while unsuspecting homebuyers may think theyre paying the lender to cover the risk and costs associated with making the loan, in truth, a portion of the mortgage payment will be placed in the Treasurys general fund to cover costs that have nothing to do with the mortgage. And because the tax applies only to conforming loans (capped at $417,000) and not to jumbo loans, its more likely to be incurred by middle- and low-income buyers.

If homeownership is an important part of the American Dream, why would Congress impose a tax on homebuyers? The answer is simple. The senators need money to pay for the nations highways. Because they cannot agree on a transportation-related funding source, they have disingenuously chosen to hide a transportation tax by calling it a fee while hoping no one will notice.

This is not the first time Congress has used a tax on conventional mortgages to fill its coffers. In 2011, when Congress needed money to extend unemployment benefits, it increased the monthly fee charged on conventional mortgages and transferred the proceeds to the general fund.

All conventional mortgages originated from 2011-21 must included this tax.

The Senate version of the transportation bill will extend this tax until 2025 to fund roads unless the House of Representatives puts a stop to it. Because federal funds for the nations highways will run out in November, members of the House must act soon. Their choices are to pass their own long-term funding bill, to act on the Senate bill or to pass a short-term funding bill, and kick the can down the road.

No matter what the House decides to do, any tax on homebuyers to pay for our nations transportation system is unwise, unfair and unacceptable. On behalf of todays homebuyers and of those who dream of becoming homebuyers, the Orange County Association of Realtors urges Congress to oppose the homebuyer tax in the Senate version of the transportation funding bill.

Rita Tayenaka is a longtime Orange County resident and president of the Orange County Association of Realtors.

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