A group of senators want to extend higher Fannie Mae and Freddie Mac guarantee fees to pay for continued cleanup from the British Petroleum Gulf Coast oil spill.
Opponents say the measure, if passed, effectively taxes potential homebuyers and consumers looking to refinance their mortgages.
Congress already approved raising the g-fees through October 2021 by 10 basis points from the average fee charged last year. The Congressional Budget Office estimates the raise would offset $35.7 billion for the costs of the extended payroll tax cut.
The amendment is being pushed to the Restore the Gulf Coast Act of 2011, which would establish a trust fund paid for only partially by fines levied against BP. Sens. Mary Landrieu, D-La., and Richard Shelby, R-Ala. sponsored the bill.
According to a fact sheet circulated by Shelby and Sen. Bill Nelson, D-Fla., the g-fee increase would be extended another year but would be 7.5 bps, which is 2.5 bps below the higher rate set by Congress to pay for the payroll tax cut. This could vary based on the amount needed by the overall bill.
“Various options have been put forth by supporters of the bill, but no final decision has been made at this point,” a spokesman for Shelby’s office said.
Mortgage industry trade groups pushed back Wednesday with a letter to Senate leaders Harry Reid, D-Nev., and Mitch McConnell, R-Ky.
“G-fees are a critical risk management tool used by Fannie Mae and Freddie Mac to protect against losses from faulty loans. Increasing g-fees for other purposes — even just extending the current fee increase by one year at a lower rate — effectively taxes potential homebuyers and consumers looking to refinance their mortgages,” according to a letter from the Mortgage Bankers Association, the National Association of Realtors and the National Association of Home Builders.
Jaret Seiberg, an analyst at the Washington-based Guggenheim Partners, said the amendment is unlikely to pass but that attempts to raise g-fees will continue to pop up during an election year.
“This reinforces our worry that Congress sees higher guarantee fees as an easy way to pay for new programs. Higher guarantee fees effectively raise costs for borrowers, which means more downward pressure on home prices,” Seiberg said.