Word of a proposed tax on Fannie Mae and Freddie Mac and a privatization plan for Ginnie Mae sent shares of the government-sponsored enterprises sharply lower Monday.

Fannie's shares fell $1.875, to $72.125, and Freddie's $2.9375, to $61.50, on word that the Office of Management and Budget is considering including the two plans in the 1999 budget proposal due to go to Congress in February.

The OMB was preparing to propose a tax of $250 million annually on both Fannie and Freddie, to raise $500 million for the Department of Housing and Urban Development's low-income housing initiatives, sources said. The tax was presented as a way to compensate the government for the companies' exemptions from registering their securities with the Securities and Exchange Commission.

Sources citing a two-page briefing on the privatization plan for Ginnie Mae said it would eventually create a rival to Fannie and Freddie in the secondary market for mortgages. They said the government would auction off the exclusive right to securitize FHA and VA mortgages, with Fannie and Freddie excluded from bidding. Their charters would be revised to prevent them from buying VA or FHA loans.

Both proposals appear to be maneuvers by the OMB to create a budget surplus, said Thomas O'Donnell, senior analyst at Salomon Smith Barney. In the case of Ginnie Mae, Mr. O'Donnell said, "it's an attempt to really change the rules of the game."

The proposals are high on a list of issues the GSEs face as the new year begins. Their regulator, the Office of Federal Housing Enterprise Oversight, is also contemplating a risk test that would force them to hold more capital.

The tax idea may have been born during discussions between the OMB and the White House about ways to fund HUD for the next fiscal year.

With military increases, a constricted budget cap, and the "fire walls" between defense and non-defense coming down, there is a "heavy emphasis from the White House to find new revenue sources in order to preserve if not increase domestic spending," said Gary Bass, executive director of OMB Watch, a nonprofit group that monitors the budget process.

"It wouldn't surprise me that the revenue would be earmarked or dedicated to Section 8 housing, or low-income housing. It would be very consistent with the kind of pressure that has been talked about," Mr. Bass said.

Fannie Mae and Freddie Mac quickly raised objections to the tax issue just before the new year, and a source at Fannie Mae said the company's contacts in Congress say the plan appears to be dead.

On Dec. 30 the government-sponsored agencies, the Mortgage Bankers Association of America, the National Association of Home Builders, and the National Association of Realtors sent a letter to Jacob J. Lew, director of the Office of Management and Budget. The groups voiced opposition to "any 'homeownership tax'-no matter the source-that would make housing finance more costly or establish other obstacles to expanded homeownership."

More than a dozen members of Congress and numerous mayors contacted the White House over the holiday weekend to voice their opposition to the tax, a Fannie Mae spokesman said. A spokesman for Freddie Mac did not return phone calls, and the Budget Office declined to comment.

A source close to HUD Secretary Andrew Cuomo said that he opposes privatization and would prefer to keep Ginnie Mae under the wing of HUD, because Ginnie Mae generates at least $400 million a year for the government.

Under the plan, a private securitizer would wind up taking the place of Ginnie Mae, but the loans would still be FHA- or VA-insured. Presently, Ginnie Mae purchases mortgages, securitizes them, and sells them to investors who buy Ginnie Mae pass-throughs.

The document projects that the government would earn $2.5 billion for fiscal year 2000 from the auction of the right to the private sector. From a budget perspective over five years, the benefit is estimated at $800 million, sources familiar with the document said.

The purchaser would be given the exclusive right to pool and securitize FHA and VA mortgages to begin operation in 2001, but revenues would be coming in during 2000.

The document leaves open the possibility that after a period of 10 to 15 years, the entity could receive "a broader charter to enter the conventional secondary market that the housing GSEs currently dominate."

Sources say that big private securitizers, such as Prudential Insurance Co., GMAC Acceptance Corp., or General Electric Co., would be likely to bid for the position.

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