Staying Ahead of Government’s Unintended Consequences via GlobeSt

If there is one certainty entering 2012, it’s that governments on all levels—federal, state and local—are strapped for funds and will be seeking new sources of revenue to make up the shortfall. Every industry, including and perhaps especially, the commercial real estate sector, is fair game.

The only question is how and where the axe will fall. In many cases, even when the answer to that question appears clear, longer-term ramifications may cloud the original assessment. So it is with the two-month payroll tax cut extension Congress pushed through at the eleventh hour before recessing for the holidays.

Economists breathed a sigh of relief—projections of growth for 2012 took into account the continuation of this tax cut. However, to pay for the tax cut’s extension, Fannie Mae and Freddie Mac must now raise the fees they collect from lenders. Specifically, Fannie and Freddie will raise their fee—typically a 0.26 percentage point of the loan’s value—by at least one-tenth of 1%, starting April 1.

Many are dismissive of the fee increase: with mortgage rates at record lows, anyone who can qualify for a mortgage will not be deterred by this incremental cost. The multifamily industry, with little other alternative, will also continue to tap the GSEs.

Probably these conclusions are correct, but the fee is bound to have some impact on the struggling housing market, says Sam Chandan, president & chief economist of Chandan Economics.

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