Home Loan Sales May Be Taxed to Fund School Construction
Mortgage borrowers everywhere could see their loan costs rise if a recommendation by the Florida School Boards Assn. bears fruit this year.
To raise money for school construction, the group of local school boards will be asking the state Legislature during its next session to tax the sale of home loans, which is a big business not just in Florida but in every state.
Indeed, some mortgages aren’t sold just once; they’re sold again and again in the secondary mortgage market.
“It’s safe to say the ownership of more than half of all mortgages is transferred,” said Guy Cecala, editor of Inside Housing Finance, a trade publication. “And 15% to 20% will be sold again within five years.”
At the suggested rate of 20 cents per $100 in value, Florida school officials estimate that the tax would raise an estimated $150 million to $200 million for new schools in their state.
As far as can be determined, no state taxes mortgage transfers. But if all 50 did, the levy could cost mortgage investors billions.
Running With Idea
For example, if the 20-cent rate Florida is considering were applied nationally to the estimated $1.9 trillion in mortgages that changed hands last year, the tax would have added $3.8 billion to investors’ costs.
According to Bob Graham, a member of the Palm Beach County School Board, the idea for the tax came from Robert Hochberg, the chief lobbyist for the Gold Coast Builders Assn. in Boynton Beach, which is looking for ways to get local government off the backs of home builders. But it is Graham who has run with the idea.
Graham, a real estate teacher at Palm Beach Community College, believes financial institutions should share the burden that growth puts on school construction.
“Consumers, builders and Realtors are already contributing,” he said. “Only the banks, most of which are out of state, aren’t paying to play in the development game.”
Florida’s school boards maintain that a transfer tax on the sale of mortgages will not have any impact on home buyers and sellers “because their respective roles have already been completed” before selling the loans.
Perhaps originating lenders could pass the tax on to their borrowers when they take out their loans, Graham conceded. But every time the loan is sold after that, he argues, they “won’t have a point-of-sale consumer to pass it back down to.”
Maybe so. But you can bet that if the mortgage transfer tax is adopted, lenders and investors will find a way to pass all their cost on to borrowers. And the easiest way to do that is by raising rates.
Fear not, homeowners: The year 2000 computer bug, a.k.a. the “Millennium Bug,” probably won’t play havoc with your payments.
The bug occurs because most software uses only the last two numbers of a year to track dates. So, when the year 2000 rolls around, there’s a good chance the computer will think it’s only 1900 and calculate interest accordingly.
Before the Bug
According to a survey by Fannie Mae, most lenders are aware of the computer mayhem that could be triggered by the date change to Jan. 1, 2000, and nearly three out of four say they have already taken steps to address potential problems.
Moreover, an overwhelming majority of the 400 financial service companies polled say they are “very confident” that their software will either be reprogrammed or replaced before the witching hour.
Distributed by United Feature Syndicate.
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Average Mortgage Rates and Indexes
Weekly Survey of 90 Southland Lenders as of Feb. 5, 1998*--*
Latest One Week Six Months week previous previous Rates for loans under $227,150 30-year fixed 6.79%/1.98pt 6.83%/1.97pt 7.23%/1.90pt 30-year ARM start rate 5.70%/1.59pt 5.70%/1.60pt 5.52%/1.37pt 15-year fixed 6.51%/1.88pt 6.56%/1.95pt 6.97%/1.75pt Rates for loans over $227,150 30-year fixed 7.14%/2.03pt 7.17%/2.04pt 7.40%/2.09pt 30-year ARM start rate 5.71%/1.57pt 5.72%/1.57pt 5.58%/1.62pt 15-year fixed 6.87%/1.82pt 6.92%/1.84pt 7.25%/1.75pt FHA or VA mortgage average points 7.00%/1.47pt 7.00%/1.93pt 7.50%/1.14pt CALVET 30-year ARM start rate 8.00% 8.00% 8.00% 6-month LIBOR 5.625% 5.625% 5.875% 1-year treasury bill 5.260% 5.280% 5.550% 6-month treasury bill 5.040% 5.060% 5.210% 6-month certificate of deposit 5.530% 5.540% 5.700% Prime rate 8.500% 8.500% 8.500% 11th District cost of funds 4.963 4.949 4.853 For the month of Dec. ’97 Nov. ’97 June ’97
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Compiled by Mortgage News Co., Morro Bay, Calif.
