Legislation that would prohibit the use of guarantee fees to offset unrelated federal spending has the full support of the Credit Union National Association (CUNA). Rep. Mark Sanford (R-S.C.) introduced the Risk Management and Homeowner Stability Act (H.R. 4893) Monday.
Government-sponsored entities (GSEs) Fannie Mae and Freddie Mac charge lenders guarantee fees, or g-fees, primarily to 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.
“Using guarantee fees for purposes entirely unrelated to housing is not sound public policy,” wrote CUNA President/CEO Jim Nussle in a letter to Sanford. “The GSEs charge these fees specifically to offset the risk of guaranteeing payment of principal and interest on loans packaged into agency securities; artificially inflating these fees can elevate housing costs above natural rates, putting homeownership out of reach for many American families at a time when the housing market is still in recovery.”
“Additionally, this fiscal sleight of hand misallocates the costs and benefits of a particular federal program or investment,” Nussle added.
Last year CUNA successfully fought to keep g-fees from being extended and used to fund highway programs, citing similar concerns about the fees’ effect on homeowners and the housing sector.