House Banking Committee Chairman Jim Leach must be getting writer's cramp.
He has been sending letters to housing industry groups, touting his proposal to force Fannie Mae, Freddie Mac, and the Federal Home Loan banks to help shore up the thrift insurance fund.
The Iowa Republican wants the politically powerful mortgage agencies to pick up half the $800 million annual interest tab on Financing Corp. bonds, issued in the late 1980s as part of the savings and loan bailout. The agencies - formally the Federal National Mortgage Association and Federal Home Loan Mortgage Corp. - charge this would be tantamount to a tax on homeowners.
With a committee vote on his proposal slated for Thursday, Rep. Leach has been sending missives to the National Association of Home Builders, Mortgage Bankers Association of America, the National Association of Realtors, and the United Home Owners Association.
He even has enlisted bankers to do their own arm-twisting.
Banks, although not wild about Rep. Leach's latest bill, like it much better than previous proposals because it requires them to pay $292 million less in Fico interest payments.
"Clearly, it's the best thing on the table so far," said Ron Ence, director of legislative affairs for the Independent Bankers Association of America.
With their fund undercapitalized, thrifts face a 23-basis-point premium disadvantage compared to banks and also are shouldering the Fico interest bill. As thrifts increasingly find ways to shift deposits to the bank insurance fund, the thrift fund shrinks. If it gets too small, there won't be enough money to pay the Fico interest, and the Fico bonds could default.
Rep. Leach is pulling no punches. In a letter sent Monday to Randall Smith, president of the National Association of Home Builders, he warned that Fannie and Freddie could push thrifts out of the mortgage market.
"If nothing is done, the S&L industry, which is one of the preeminent providers of housing finance at the local level, is totally jeopardized," he wrote.
Rep. Leach cited a study by the Congressional Research Service that concluded that extending the Fico interest bill to Fannie and Freddie would have no effect on mortgage rates and would be less than their annual federal subsidy.
Rep. Leach followed up with a phone call to Kent Colton, the Home Builders group's chief executive. But the committee chairman hasn't changed any minds yet. "Our position is that we oppose an impact fee on Fannie, Freddie," said Kathy Gerlach, the builders group's assistant staff vice president for legislative affairs.
Rep. Leach isn't the only one doing the lobbying. Edward Yingling, the American Bankers Association's chief lobbyist, said his group and the IBAA have agreed to send a joint letter asking the builders to stop opposing the proposal. It would remind them that bankers perceive the Fico interest bill as a "tax on deposits used to fund loans to buyers and builders."