WASHINGTON (9/9/14)--The Credit Union National Association has answered with a "resounding no" in responding to the Federal Housing Finance Agency's (FHFA) request for comment regarding higher guarantee fees, a.k.a. "g-fees." In a comment letter filed Monday, CUNA states that g-fees should not be increased, particularly to achieve policy objectives.
The FHFA asked for comment on whether g-fees should be increased in order to shrink the footprints of by Fannie Mae and Freddie Mac.
"G-fees are a critical risk management tool used by Fannie Mae and Freddie Mac to protect against losses from faulty loans, and should be used only to manage the companies' credit risk in order to sustain the operations of the Enterprises until Congress properly addresses housing finance reform," reads the letter.
"Increasing g-fees for other purposes, such as to reduce the Enterprises footprint before comprehensive housing finance reform can be passed, effectively taxes potential homebuyers and consumers wishing to refinance their mortgages.
CUNA believes that g-fee increases unrelated to housing could also hinder the necessary housing reforms required by the housing finance system, due to the billions in dollars generated by the fees that go to the U.S. Treasury.
"As FHFA studies g-fees, the only question the agency should be asking is 'What is the optimum level that accurately prices risk for the enterprises, protects taxpayers from downside risk, and does not unnecessarily overcharge borrowers?'" the letter reads. "We believe the current level of g-fees meets these criteria."
Fannie Mae Chief Economist Doug Duncan lowered his existing home sales forecast for 2015 by 2% and his mortgage origination forecast by 4% last week, an indicator that recent housing market gains might be short-lived.
CUNA is concerned that raising g-fees in this environment could cause a contraction in overall lending.
"Raising g-fees in the name of policy will force the member-owners of credit unions to pay higher rates for their mortgages than the actual risk that they pose," the letter reads. "The result will be a policy that intentionally overcharges borrowers, which makes little sense at a time when the housing recovery is still in a nascent stage."
CUNA supported the 2013 decision to suspend increases in g-fees and continues to advocate to ensure regulation of the secondary market ensure credit unions have access to an equitable secondary market.
According to CUNA, this means terms, rates or conditions for selling loans in the secondary market "must be affordable and fair to all lenders, regardless of their size, or charter type. In particular, guarantee fees or other fees/premiums should never have a relationship to lender volume."
Use the resource link below to access the letter.