MBA, Trade Groups Urge Congress to Ban GSE G-Fee Offsets

The Mortgage Bankers Association and nearly three dozen other industry trade groups, in a Mar. 6 letter to House and Senate leadership, urged Congress to continue to prevent use of Fannie Mae and Freddie Mac guarantee fees as a source of funding offsets.

“As representatives of institutions that span the entire housing finance ecosystem, we firmly believe that g-fees should only be used as originally intended: as a critical risk management tool to protect against potential mortgage credit losses,” the letter said.

Fannie Mae and Freddie Mac use the guarantee fees, also known as g-fees, as a risk management tool to cover operating costs and losses that occur in their operations. In 2011, Congress authorized a 10 basis-point increase in the g-fees over a 10-year span to fund a tax-relief program, a move widely objected to by the real estate finance industry and related industries.

Since then, MBA and other trade groups have beaten back several attempts by Congress to authorize further g-fee offsets; the Mar. 6 letter attempts to discourage Congress from attempting to do so again this year during the fiscal 2021 budget process.

“That increase harmed homebuyers by raising the cost of homeownership in all parts of the country–and continues to do so during the duration of the provision’s decade-long lifespan, which expires in 2021,” the letter said. “Since then, whenever Congress or the Administration has considered using g-fees to cover the cost of non-housing-related programs (such as those addressing infrastructure, immigration, or the environment), our organizations have united to emphatically let lawmakers know that homeownership cannot, and must not, be used as the nation’s ‘piggybank.’ We are united again to reaffirm our opposition to the Congress’s potential use of these fees for any funding offset that may be contemplated.

The letter noted g-fees are included within the cost structure of all mortgages in securities backed by the GSEs and are paid by borrowers over the entire life of their loans. Over a 30-year term, 10 basis points in g-fees amounts to an additional $5,100 in mortgage payments on the average GSE loan amount of $255,000. The letter expresses support for Sens. David Perdue, R-Ga., and Robert Menendez, D-N.J.; and Reps. Brad Sherman, D-Calif., and Lee Zeldin, R-N.Y., for introducing bipartisan legislation in the 116th Congress that would prohibit use of g-fees as a budgetary offset, “and we urge both chambers to take up this legislation as quickly as possible.”   

The letter also noted while today’s housing market continues to show strength, lawmakers must avoid taking any steps that may exacerbate affordability challenges, which could in turn have negative consequences for the broader economy. “The unintended effects of any proposed g-fee increase or extension–no matter how well-intended–will be to raise the cost of homeownership for middle-class Americans, while curtailing refinance activity that helps to keep creditworthy borrowers in their homes,” the letter said. “Moreover, implementing yet another g-fee increase will hinder policymakers’ abilities to execute the necessary reforms required of the GSEs in the years ahead.”

MBA and the trade groups said using g-fees as a funding mechanism is “wholly inappropriate and shifts the burden of paying for non-housing-related initiatives to the country’s current and future homeowners. The benefits of affordable homeownership accrue to families, communities and our national economy; we simply cannot allow these benefits to be jeopardized by efforts to raise g-fees unnecessarily.”