WASHINGTON (9/16/15)--CUNA joined more than 30 financial organizations Monday in requesting that the U.S. Congress refrain from using guarantee fees (g-fees) as funding for any purpose other than supporting Fannie Mae and Freddie Mac safety and soundness.
The letter, sent to leadership of both the Senate and the House, comes after the Senate added a provision increasing g-fees and extending the fee's expiration date by four years to 2025 as part of a long-term highway funding bill (H.R. 22).
The proposal contained in H.R. 22 would use the higher fees charged from 2021 to 2025 to fund highway programs.
Fannie and Freddie charge lenders the g-fees primarilyto protect against credit-related losses in the mortgage portfolio. In 2011, those fees were raised by 10 basis points until 2021 to fund a two-month extension of the payroll tax.
“We understand the critical need to reauthorize highway programs,” the CUNA coalition letter reads. “However, we 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 government-sponsored entities (GSEs) from effectively managing their risk and managing their duty to ensure that creditworthy borrowers from underserved communities has access to sustainable credit.”
CUNA previously wrote to Senate leadership in July, urging the legislators to strip the g-fee extension provision.
“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 reads. 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.
G-fees are currently included within the cost structure for all Fannie and Freddie-backed mortgages, and are paid by borrowers over the entire life of the loans.
“Thus any increase imposed now would continue to be paid by borrowers with GSE mortgages for many years,” the letter reads.