Money Shuffling
December 23rd, 2011 (04:04 pm)Congress has now agreed to a 2-month extension of the payroll tax-cut, fixing the cut in Medicare expense payments to physicians, and another extension of unemployment benefits.
The current Social Security tax we pay on earnings is 4.2% of the first $110,100 (2012 amount) –reduced from the 6.2% charged previously.
The Medicare “fix” prevents a regulation from going into effect that reduced payments from the government Medicare program around 27% this year. These payment reductions have been “fixed” since 2003 through other legislation.
“Regular” Unemployment Insurance provides benefits for the first 26 weeks someone is out of work. “Emergency” benefits add 59 weeks, and “Extended” benefits add another 20 weeks for a total of 99 weeks. The Extended benefits would have expired 12/31/11 without this legislation.
The 33 Billion Dollar Question is: how is this paid for? It is paid for by a new mortgage “delivery fee”, tax, surcharge, or whatever you want to call it.
9 out of 10 mortgages in the U.S. are funded by 1 of 3 government agencies–Fannie Mae, Freddie Mac, and FHA. In order for banks to provide those mortgage loans going forward, this new fee will be collected from borrowers with higher closing and higher interest rates.
While Fannie Mae and Freddie Mac lose money continually, and FHA’s finances are questionnable from time to time, these extra mortgage fees will not be kept by those agencies. This doesn’t make sense that they wouldn’t keep the money they need badly, but officially the intent here is to steer potential borrowers toward mortgages provided by banks rather than toward those mortgages funded by the government. This seems like a good explanation, BUT this new fee is not nearly enough to make the agencies more viable and does not put them in the same league as what regular lenders charge. Again, it’s being used to pay for other government programs.
So for now the government will keep shuffling money around.
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