Consumers soon will be paying more for government-backed mortgages now that the House and Senate have reached a deal to extend a payroll tax break for two months.The bill (H.R. 3630) pays for the payroll measure by hiking guarantee fees on Fannie Mae and Freddie Mac loans by 10 basis points. Lenders will pay the extra points but, more than likely, will past the cost onto borrowers.

After a bitter fight over the two-month extension, congressional leaders reached a deal late Thursday. They will return to Washington in January to hammer out a full-year extension. Mortgage industry leaders are hoping lawmakers will look elsewhere for revenues to fund the next extension.   

H.R. 3630 also increases annual premiums on Federal Housing Administration (FHA) single-family loans by 10 bps.  This corresponding hike is designed to ensure that FHA goes not gain a competitive advantage and increase its market share via the GSEs.

Industry leaders were relieved to learn that the higher premiums will be used to bolster the FHA's undercapitalized mortgage insurance fund and will not be diverted to pay for other government programs or tax breaks.

In addition, FHA can phase-in the 10 bp annual premium increase over two years. The agency currently charges a 115 bp annual premium.

Congressional leaders will pass H.R 3630 on Friday, sending the measure to President Obama for his signatur

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