Bill would prevent Congress from using g-fees as budget tool

WASHINGTON — Two senators have introduced legislation that would prevent the Senate from using increases in fees collected by Fannie Mae and Freddie Mac to offset hikes in federal spending.

The bill by Sens. David Perdue, R-Ga., and Bob Menendez, D-N.J., both members of the Banking Committee, would establish a “scorekeeping rule” to ensure that any increases in guarantee fees, or g-fees, cannot be used to offset provisions that increase the deficit, as has been done in the past. Lenders typically pay g-fees to the government-sponsored enterprises to back loans.

“It’s time for Congress to cut the budget gimmicks and back-door tax hikes on middle-class Americans,” Perdue said. “Any increase of guarantee fees should be used to protect taxpayers from mortgage losses, not as an artificial offset whenever Congress decides to spend more money.”

Sen. David Perdue, R-Ga.
Senator David Perdue, a Republican from Georgia, speaks during the Faith and Freedom Coalition's "Road to Majority" conference in Washington, D.C., U.S., on Friday, June 19, 2015. The annual Faith & Freedom Coalition Policy Conference gives top-tier presidential contenders as well as long shots a chance to compete for the large evangelical Christian base in the crowded Republican primary contest. Photographer: Drew Angerer/Bloomberg *** Local Caption *** David Perdue
Drew Angerer/Bloomberg

Menendez said the bill would ensure that homeowners aren’t faced with unnecessary fees.

“The last thing Congress should be doing is making it more expensive for middle-class families to borrow and buy a home — especially to use it to pay for wasteful policies that don’t support the middle class or homeowners,” he said. “Yet, that’s exactly what an arbitrary and unfair fee hike on homeowners would do. We need Fannie Mae and Freddie Mac to stick to the job of helping families achieve the American Dream of homeownership. Neither Congress nor the president should be balancing its books on the backs of hardworking homeowners.”

The legislation comes as Congress and Mark Calabria, the newly appointed Federal Housing Finance Agency director, look to reform the nation’s housing finance system. Calabria has said he intends to help force the end of the GSE conservatorship through either legislation or administrative action, while Senate Banking Committee Chairman Mike Crapo, R-Idaho, has released his own outline for reform. Perdue and Menendez are the chairman and ranking member of the housing subcommittee, respectively.

Similar legislation regarding g-fees was introduced in 2015 by a bipartisan group of senators in order to spur housing finance reform. Lawmakers in the past have looked to g-fee increases to pay for legislative initiatives outside of housing, including payroll tax cuts and transportation measures. President Trump's proposed 2020 budget also calls for an increase in the g-fees.

Both the Mortgage Bankers Association and the National Association of Realtors support the bill.

“Guarantee fees are a critical risk management tool used by Fannie Mae and Freddie Mac to protect against losses,” said MBA President and CEO Bob Broeksmit. “Any increase of these fees that is not related to housing is effectively a tax on homeownership.”

John Smaby, the president of the Realtor group, added that the legislation "will help to protect taxpayers and countless potential homebuyers" by prohibiting lawmakers from raising the guarantee fees to address unrelated federal spending.

For reprint and licensing requests for this article, click here.
Housing finance reform GSEs GSE reform Senate Banking Committee Fannie Mae Freddie Mac
MORE FROM AMERICAN BANKER