Mortgage

Congress reaches highway deal without controversial use of Fannie, Freddie fees

Under deal, g-fees will not be used to fund new roads

Thanks to a landmark agreement between the Democrats and Republicans in both the House of Representatives and the Senate, it’s looking increasingly likely that the fees charged by Fannie Mae and Freddie Mac to guarantee loans will not be used to fund new roads.

According to multiple reports, including from the Wall Street Journal, negotiators from both Congressional houses struck a deal on a five-year highway bill, with only formal votes from both houses and a signature from President Obama remaining to make the deal official.

Not included in the highway bill was a controversial portion of a massive transportation bill that would have used g-fees to offset the cost of the bill.

Earlier this month, the House of Representatives passed its version of the Developing a Reliable and Innovative Vision for the Economy Act, also called the DRIVE Act.

Absent from the House version of the bill was a “pay-for” — the mechanism which funds the bill — that would have significantly delayed scheduled cuts in g-fees.

Increases in Fannie and Freddie’s g-fees, which were originally put in place in 2011, are set to decline by 10 basis points at the end of 2021.

To fund part of the transportation bill, the decrease in g-fees would have been delayed until the end of 2025 – a four-year extension of the increased g-fees.

The House voted overwhelmingly to remove the g-fee pay-for, approving an amendment put forth by Rep. Randy Neugebauer, R-Tex., and Bill Huizenga, R-Mich., that removed the g-fee pay-for.

The g-fee pay-for was still under consideration in the Senate, but it had its opponents there as well.

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, a practice the Senators call a “budgetary gimmick” and a “back door tax” on homeowners.

Later, Crapo and Warner sent a letter to Senate Majority Leader Mitch McConnell, R-Ky., and Senate Minority Leader Harry Reid, D-Nev., saying that 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.

Crapo sent another letter in recent weeks to several of colleagues urging them to consider the implications of using g-fees to offset the cost of a Federal 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 writes. “Attempts to increase or extend these fees makes it more difficult to reform our housing system and wind down Fannie Mae and Freddie Mac.”

Now, the g-fee pay-for has been removed – a move that was welcomed by two of the housing industry’s largest trade groups.

In a statement issued Tuesday by the Mortgage Bankers Association, David Stevens, the president and CEO of the MBA, said that the group is very pleased that g-fees were left alone by the highway bill.

“MBA commends the House and Senate conferees and leadership for reaching agreement on a multi-year transportation bill without taxing homeowners via an extension of higher Fannie Mae and Freddie Mac guarantee fees,” Stevens said. “MBA will continue to advocate vigorously on this issue and on behalf of policies that both ensure a healthy real estate market and empower consumers with affordable, sustainable housing choices.”

National Association of Realtors President Tom Salomone also applauded sections of the bill that are “important to strengthening neighborhoods and promoting safety,” and joined the MBA in welcoming the decision not to use g-fees to fund the bill.

“The multiyear transportation bill moving through Congress is a win across the board, making critical investments in America’s infrastructure,” Salomone said.

“NAR is pleased at the emphasis placed on safety and alternative transportation options to strengthen neighborhoods, improve property values and make non-motorized transportation, like sidewalks and bike lanes, a priority,” he continued.

“Moreover, this legislation recognizes the value of homeownership and the need to protect future homeowners from unnecessary costs,” Salomone added. “NAR applauds the conference committee for standing with the homeowners of today and tomorrow.”

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