Ginnie Mae Fee Increase Coming

To pay for the Higher Education Act (H.R. 6), House and Senate conferees agreed to increase the Ginnie Mae guaranty fee from 6 basis points to 9 bp, starting Oct. 1, 2004.The delayed effective date is strictly a budgetary device to pay for higher interest rate subsidies on student loans in the second five years of the authorization bill. However, proponents of increasing Ginnie Mae fees secured their first victory and it leaves the possibility open that the next Congress will go for an immediate increase in Ginnie Mae fees to pay for some other program. The Congressional Budget Office estimates a 3 bp increase in Ginnie Mae fees raises $40 million in extra government revenues per year and a 6 bp increase raises $80 million. The conferees were "under strong pressure" to go with an immediate 6 bp increase, a source said. But the conferees decided to pay for the first five years by eliminating the discharge of student loans in bankruptcy. The bankruptcy provision raises $215- $260 million over five years. "Although this [Ginnie Mae] fee increase is outside our committee's jurisdiction, it is the understanding of the conferees that it can be implemented in a way which does not adversely affect low-income homebuyers," the H.R. 6 conference report says. The House and Senate are expected to pass the conference report this week and send it to the President for his signature.