Last year, the mortgage industry fought and derailed a proposal to
use guarantee fees (g-fees) collected by Fannie Mae and Freddie Mac to fund highway projects.
future g-fee raids, the industry's largest trade groups now want Congress to permanently take g-fees off the table as a
potential funding source.
The Risk Management and Homeowner Stability Act of 2017, which was
introduced last month by U.S. Reps. Mark Sanford, R-South Carolina, and Brad Sherman,
D-California, specifies that g-fees could only be used to insure against the
credit risk of home mortgages. The bill also contains an exception that would
allow g-fees to be used to fund reforms to the secondary mortgage market.
Mortgage Bankers Association, the American
Bankers Association, the Independent Community Bankers of America (ICBA) and 10
other trade groups recently signed a letter in support of the bill.
say guarantee fees offer a tempting source of funding to make up for
budget shortfalls. Unlike the gasoline tax and other visible taxes, few
homeowners are aware of g-fees. A guarantee fee is collected by Fannie and
Freddie from the lenders, who typically pass on that cost to borrowers in the
form of a higher interest rate on affected mortgages. The fees are specifically
intended to guarantee the mortgage-backed securities sold to investors, and to cover
administrative costs related to securitizing the mortgages.
“Congress is always looking for revenue and the GSE
g-fees are an easy target,” said Ron Haynie, ICBA’s senior vice president of
mortgage finance policy.
“ICBA is very concerned about congressional
‘pay-fors’ that take revenue from one source and use it to pay for something
completely unrelated,” Haynie told Scotsman Guide News. “It’s bad policy.”
G-fees have been used
one time before to fund the budget. In 2011, Congress raised g-fees by 10
basis points for a period of 10 years through 2021 to pay for a temporary payroll
tax cut. Last year, U.S. Senate leaders proposed extending that increase for four
years to raise $1.9 billion to make up for a hole in the transportation
budget. The Senate abandoned that plan after heavy opposition from the
Last year, a similar
measure to prevent g-fee raids was introduced in the Senate Banking Committee under one section of the Jumpstart
GSE Reform Act, but that bill
“As for the bill’s chances, it’s hard to predict right now,”