California Homeowner Legislative Facts

Congress Still May Tax Mortgages to Pay for Highways (9/30/2016)

Back in July the U.S. Senate passed a long-term Transportation funding bill that includes a tax on mortgages to pay for the construction of highways. To make it more palatable to Republican lawmakers, this tax has been disguised as a “fee.” This tax isn’t small potatoes either. On a median priced home in California, homeowners could pay over $8,000 for this tax.

While the Senate has passed its version of the long-term Transportation bill, the House has merely passed a short-term version to keep the federal Transportation Department open. The House plans to  pass its own version sometime this fall, but there’s no guarantee that this new tax won’t be included in that version.

The California Association of REALTORS® is actively opposing this approach to paying for the highway bill and is encouraging the public to get involved. People are urged to visit www.nomortgagetax.org and go to the “Take Action” tab to send a personal message to Congress to oppose the tax. The public can also get updates on Facebook at www.facebook.com/no.mortgage.tax or follow the campaign on Twitter™ at @NoMortgTax.

Under current law, a portion of every conforming loan, (those backed by Fannie Mae and Freddie Mac) includes a fee used to offset losses from bad loans and to pay for the administrative costs of running these companies. These are called guarantee fees (or g-fees). In 2011 Congress added on an additional.1% increase on the interest rate of every Fannie and Freddie mortgage to fund a six month extension of unemployment benefits. That “add on” was due to expire in 2021 and loans originated after that date would not be subject to the additional fee.

The U.S. Senate’s highway bill extends the “add-on” fee until 2025 for all new mortgages in order to pay for transportation infrastructure. As an example using real numbers, buyers purchasing a median priced home of $489,560 using a typical conforming loan with a 20% down payment will pay an additional $8,100. This figure is sure to rise with an increase in sales prices.

The California Association of REALTORS®, believing the guarantee fee should only be used for its intended purpose, and continues to oppose this funding mechanism.

 

Congress Considers Homeowner Tax to Pay for Transportation (9/1/2016)

Do you ever wonder how Congress pays for the spending bills it enacts? In the case of the long-term Transportation bill that the Senate recently passed, a new tax on mortgages has been created and disguised as a “fee.”

Under current law, a portion of every conforming loan, (those backed by Fannie Mae and Freddie Mac) includes a fee used to offset losses from bad loans and to pay for the administrative costs of running these companies. These are called Guarantee Fees (or G-fees). In 2011 Congress added on an additional 10 Basis Points, equal to .1% of the value of the loan, to the guarantee fee of every new loan to fund a six month extension of unemployment benefits. That “add on” was due to expire in 2021 and loans originated after that date would not be subject to the additional fee.

Now the U.S. Senate just passed a long-term transportation funding bill that extends the “add-on” fee until 2025 for all new mortgages in order to pay for transportation infrastructure. As an example using real numbers, buyers purchasing a median priced home of $489,560 using a typical conforming loan with a 20% down payment will pay an additional $8,100. This figure is sure to rise with an increase in sales prices.

This “G-Fee” is actually a disguised tax on homebuyers. That “fee” has nothing to do with a mortgage and is therefore a tax. And while everyone would benefit from improved roads and highways, only those who originate a loan during that period will be paying for these benefits enjoyed by all.

While the Senate has passed its version of the Transportation bill, the House has merely passed a short-term version to keep the federal Transportation Department open. The House plans to  pass its own version sometime this fall, but there’s no guarantee that this new tax won’t be included in that version. The California Association of REALTORS®, believing the guarantee fee should only be used for its intended purpose, steadfastly opposes this funding mechanism and its members will be meeting with their congressional representatives this month to explain why.

 

Property Tax Relief for Seniors (7/31/2016)

A bill making its way through the California Assembly would make it easier for people who are 55 or older to receive property tax relief. For many of our parents and grandparents, this can mean the difference between keeping or being forced to sell their home.

Here’s the issue. California law today allows seniors to transfer the base value of their property to a new residence as long as the new house was in the same county and cost less than the old residence’s sale price. The problem is that only one spouse or partner can claim the tax transfer. That effectively discriminates against the other partner, preventing them from the same tax relief should their circumstances change.

Assembly Bill (AB) 1378 by Assemblymember Chris Holden (D-Pasadena) fixes this problem by giving both spouses an opportunity to take advantage of tax relief. It helps seniors by removing what some have called a “marriage penalty” that costs seniors, many with fixed or limited income, thousands of dollars in annual property taxes.

California has a long history of providing tax relief to help seniors keep their homes. California Association of REALTORS® continues to support this important tradition and believes this should measure should be passed.