MBA, Trade Groups Press Congress on G-Fee Use
The Mortgage Bankers Association joined more than two dozen industry trade groups in a letter calling on Congress to refrain from allocating Fannie Mae/Freddie Mac credit risk guaranty fees as a source of funding for highway programs.
MBA and the trade groups reiterated their long-standing opposition to using g-fees for any other purpose beyond supporting the government-sponsored enterprises’ safety and soundness.
“G-fees are a critical risk management tool used by Fannie Mae and Freddie Mac to protect against losses from loans that default,” the letter said. “Increasing g-fees for other purposes–even just extending the current incremental fee increase added to offset the cost of the payroll tax holiday for four years–imposes an unjustified burden on the housing finance system.”
The letter noted that g-fees are included within the cost structure for all Fannie Mae and Freddie Mac backed mortgages and are paid by borrowers over the entire life of their loans. It pointed out that any increase imposed now would continue to be paid by borrowers with GSE mortgages for many years beyond the proposed three-year imposition of the additional fee.
“The nation’s housing market remains in a precarious state,” MBA and the trade groups said. “The unintended impact of this proposed g-fee increase extension will be to keep housing consumers on the sideline, preventing the absorption of our nation’s large real-estate owned inventory, as well as curtailing refinance activity that is needed to keep creditworthy borrowers in their homes.”
The letter asserted that such a fee would be a “regressive tax,” imposing the largest burden on low- and moderate-income borrowers and borrowers with low wealth who already face serious obstacles in obtaining fair and sustainable credit. “Moreover, many of these borrowers struggling to obtain homeownership are disproportionately Latino and African-American,” the letter said. “Adding an additional fee to mortgages for unrelated expenses would only increase the hurdles these families already face in achieving the American dream of homeownership.”
While the letter expressed the trade groups’ understanding of the critical need to reauthorize highway programs, they are “united in our belief that using g-fees as a funding mechanism for this purpose shifts the burden to homeowners and the housing sector in a manner that prevents the GSEs from effectively managing their risk and managing their duty to ensure that creditworthy borrowers from underserved communities have access to sustainable credit.”
Congress is expected to consider the highway funding bill during the current legislative session; amendments would prohibit use of g-fees to extend highway projects.
Joining MBA in the letter: America’s Homeowner Alliance; the American Bankers Association; the American Escrow Association; the American Land Title Association; the Asian Real Estate Association of America; the Center for Responsible Lending; the Community Associations Institute; the Community Home Lenders Association; the Community Mortgage Lenders of America; the Consumer Federation of America; the Consumer Mortgage Coalition; Credit Union National Association; the Homeownership Preservation Foundation the Housing Policy Council of the Financial Services Roundtable; the Independent Community Bankers of America; The Leadership Conference on Civil and Human Rights; Leading Builders of America; the Louisiana Bankers Association; the National Association of Federal Credit Unions; the National Association of Hispanic Real Estate Professionals; the National Association of Home Builders; the National Association of Mortgage Brokers; the National Association of Realtors; the National Association of Real Estate Brokers; the National Community Reinvestment Coalition the National Council of State Housing Agencies; the National Consumer Law Center; the National Housing Conference; Real Estate Services Providers Council Inc.; The Realty Alliance; and U.S. Mortgage Insurers.
