April, HousingWire published an infographic that sought to answer an important question we had — how many members of the 115th Congress had any connection to the housing economy? In other words, how many would have any clue about how their legislation would affect the largest driver of the U.S. economy?
The answer? Not enough.
We found that 70 out of the total of 541 had either been real estate professionals, home builders, real estate investors or bankers. That’s a paltry 12.9%.
The exact number is hard to arrive at because, like many of us, members of Congress have held a variety of jobs. Still, the number explains a lot. How else to account for the recent legislative move to use g-fees to fund a massive highway project? Do most members of Congress even understand what a g-fee is? Perhaps not.
Which is why I had to cheer when the Association of Mortgage Professionals (also known as NAMB) called for full disclosure of the g-fees on the much-maligned Know Before You Owe forms.
These new TILA-RESPA Integrated Disclosure forms, which lenders must start using on Oct. 3, were developed by the Consumer Financial Protection Bureau to give mortgage borrowers more information so they can compare mortgage features among lenders.
Introducing transparency into what has been a very murky mortgage process is commendable. I have reservations about how this is actually being accomplished by the new forms, but I support the notion that more information is better. Which is why I support NAMB’s proposal to inform consumers about how g-fees factor into their mortgage costs.
If consumers are confused by the difference between their interest rate and an APR — which is what the CFPB found in their surveys — it’s a safe bet that these same consumers have absolutely no idea what a guarantee fee is. As NAMB noted, g-fees are “not readily detectable” to consumers in the mortgage documents because the g-fees are incorporated into the interest rates paid by borrowers.
“In the spirit of full transparency on behalf of consumers involved in the home buying process, we’re asking Congress to require that the new TRID forms being used by CFPB contain a specific line item showing homebuyers exactly how much of their home purchase costs are in fact fees that in no way benefit them and are unrelated to the home purchase itself,” NAMB President John Councilman said.
As David Stevens, president and CEO of the Mortgage Bankers Association explained: “Taxing homebuyers, which is the practical effect of increasing guarantee fees, to pay for unrelated government spending like this, is simply bad policy. It’s bad for borrowers, it’s bad for the housing market and it’s bad for the economy.”
Some in Congress seem to understand how ludicrous it is to use the g-fees to fund a big transportation project.
Earlier this year, Sen. Mike Crapo, R-Idaho, and Sen. Mark Warner, D-Va., introduced a budget point of order that would prevent g-fees from being used to offset federal spending, then followed up with a letter to the Senate leadership in late July, asking them to reconsider the use of g-fees for the highway bill.
“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.
Which brings us back to the NAMB proposal.
Having the g-fees outlined as a line item on the TRID forms won’t help potential homebuyers shop around for lenders, it’s true.
But it could help them shop for new representatives on Capitol Hill, which could be a good thing.
We need representatives who understand the critical role of home buying in the larger economy, and who understand the complexities of mortgage finance.
Let’s let the sun shine down on all sides of the mortgage equation, even the parts the government doesn’t want us to see. Especially those parts.
