Reaffirming their position that the fees charged by Fannie Mae and Freddie Mac to guarantee loans should not be used to fund federal spending, Sen. Mike Crapo, R-Idaho, and Sen. Mark Warner, D-Va., sent a letter to the Senate leadership, asking them to reconsider the use of g-fees to offset the cost of a massive transportation bill.
The bill, called The Developing a Reliable and Innovative Vision for the Economy Act or the DRIVE Act, is a six-year highway authorization that will allow planning for important long-term projects around the country, and provides three years of guaranteed funding for the highway trust fund.
But one of the ways the $47 billion bill is paid for is a significant delay to scheduled cuts in g-fees. The bill would delay a scheduled 10 basis point cut in g-fees from 2021 to 2025.
Earlier this year, Crapo and Warner introduced budget point of order that would prevent g-fees from being used to offset federal spending, a practice the Senators call a “budgetary gimmick” and a “back door tax” on homeowners.
Now, in a new letter sent to Senate Majority Leader Mitch McConnell, R-Ky., and Senate Minority Leader Harry Reid, D-Nev., Crapo and Warner say any increase or extension of g-fee standards should be used to protect taxpayers from mortgage losses and to repay the federal bailout, not for unrelated programs.
“Each time guarantee fees are extended, increased and diverted for unrelated spending, homeowners are charged more for their mortgages and taxpayers are exposed to additional risk,” Crapo and Warner said in their letter.
“Attempts to increase of extend these fees makes it more difficult to reform our housing finance system and wind down Fannie Mae and Freddie Mac,” the letter continues.
Crapo and Warner write that the purpose of the g-fees is to protect against Fannie and Freddie credit losses from borrower defaults say that using g-fees in spending legislation double-counts revenue.
The Senate Committee on Environment and Public Works said that the delay in g-fee cuts would fund $1.9 billion of the $47 billion needed to fund the bill.
In the Senate Committee on Environment and Public Works explanation of the funding of the bill, which can be read here, it states, “the regulator for Fannie Mae and Freddie Mac recently completed a review of the guarantee fees and found ‘no compelling economic reason to change the general level of fees’ which are continued by this provision.”
But Crapo and Warner argue that any use of g-fees for unrelated federal spending would actually cause the government to overspend and “greatly increase” the federal deficit.
“It is our collective responsibility to uphold our bipartisan budget scoring rule to protect against overspending that would increase the deficit,” Crapo and Warner write.
“We urge you to follow-through on the commitment to not use Fannie and Freddie as a piggybank in the Budget Resolution and remove the extension of guarantee fees from the transportation reauthorization,” the letter concludes.
Crapo and Warner’s letter can be read in full here.