A bipartisan group of Senators, led by two of Capitol Hill’s loudest voices on housing reform, is fighting back against a “budgetary gimmick” that allows the federal government to use funds raised from Fannie Mae and Freddie Mac’s guarantee fees to cover federal spending.

Sen. Mike Crapo, R-Idaho, and Sen. Mark Warner, D-Va., are leading a bipartisan group of their colleagues on the Senate Banking Committee in introducing a budget point of order that would prevent G-fees from being used to offset federal spending, a practice the Senators say is a “back door tax” on homeowners.

“Guarantee fees should be used to protect taxpayers from risk, but some want to increase these fees simply to create a piggy bank for Congress,” Warner said. “I have pushed repeatedly for true housing finance reform to end this system of private gains and public losses. Raiding Fannie and Freddie G-fees to pay for unrelated federal spending only makes that goal more difficult to reach.” 

In June of last year, the Federal Housing Finance Agency announced that it would seek industry input on potentially raising the guarantee fees that Fannie Mae and Freddie Mac charge lenders.

The G-fees are charged and used as a risk management tool by Fannie and Freddie to protect against prospective credit losses from borrower defaults. 

According to a release from Warner’s office, each time these fees are increased and diverted for unrelated spending by Congress, taxpayers are “left exposed to additional risk and homeowners ultimately incur the cost in their mortgage bills.”

In addition, the more guarantee fees are used as offset, the harder it will become to implement much-needed reforms to the nation’s housing finance system because it increases the price tag of any legislation, Warner’s office said.

“Congress must get serious about reforming Fannie and Freddie and stop treating them as political entities,” Crapo said.  “Any increase of guarantee fees should be used to protect taxpayers from mortgage losses — not used as an artificial offset for new government spending.”

The bill, S. 752, is co-sponsored by Sens. Richard Shelby, R-Ala., Jon Tester, D-Mo., Bob Corker, R-Tenn., Heidi Heitkamp, D-N.D., David Vitter, R-La., Joe Donnelly, D-Ind., Mark Kirk, R-Ill., Dean Heller, R-Nev., Tim Scott, R-S.C., and Jerry Moran, R-Kan.

Under the proposed legislation, a congressionally mandated increase of guarantee fees can only be used for deficit reduction and will not be scored as an offset.

Additionally, a 60-vote threshold would still be required on a provision that spends more or reduces taxes and is offset with a guarantee fee increased because the fee would not be recognized as an offset, Warner’s office said.

Warner’s office also said that the group is looking to include the measure in upcoming budget negotiations as a way to “advance the important legislation.”