A new proposal floated in Congress last week would tax mortgage borrowers to cover an extension of the payroll tax cut.

Similar proposals put forward by Senate Democrats and House Republicans would raise the fees charged on Fannie Mae and Freddie Mac mortgages. The Senate proposal calls for a tax of at least 0.125 percent of the amount borrowed; the House proposal calls for a tax of 0.1 percent.

The measures would raise an estimated $38 billion over 10 years.

The Social Security payroll tax is currently at 4.2 percent, and is scheduled to return to 6.2 percent next year with the expiration of a temporary reduction designed to boost the economy. Congressional leaders in both parties have expressed support for extending the cut, but have expressed disagreement over how to pay for it.

Members of the real estate and mortgage industry have objected to the proposal, saying the fees would be counterproductive and would establish an undesirable precedent for using fees from Fannie Mae and Freddie Mac for purposes other than ensuring the soundness of the housing finance system.

The federal government currently imposes a fee of 0.25 percent of the amount borrowed on Fannie Mae and Freddie Mac mortgages, which is used to guarantee loans the two lenders buy or insure. The federal government has spent about $150 billion prop up the two private, but government-created, in the wake of losses incurred when the housing market collapsed.

Advocates for the proposed fees say they would encourage more private lending by effectively raising the cost of mortgages guaranteed by Fannie Mae and Freddie Mac. Others say they would simply drive up demand for FHA mortgages, unless similar fees are imposed on those mortgages as well.

Published on December 12, 2011