Raising guarantee fees on government-backed loans again would make a “bad situation worse,” according to three industry groups that are lobbying elected officials to find new ways of funding a 10-month extension of the payroll tax holiday.
In December, Congress approved a 10-basis point increase in Fannie Mae and Freddie Mac g-fees to fund a two-month extension of the tax break.
That short-term extension expires March 1. A House/Senate panel met earlier this week to start looking for ways to pay for the extension.
The panel's negotiations over the next month are expected to be contentious.
The Mortgage Bankers Association, National Association of Home Builders, and National of Realtors want the legislators to “declare that they will not consider further g-fee increases” to pay for the extension.
“Such a declaration is necessary to dispel any market uncertainty over whether Congress will make a bad situation worse by mandating additional g-fee increases,” the Jan. 26 letter says.
The industry groups warn that the GSEs will have to charge the extra 10-bp fee for the next 10 years with revenues covering the cost of the short-term payroll tax holiday. None of that money will go to the GSEs to help them manage risk or rebuild capital.
“We strongly objected to this provision as an inappropriate use of fees,” the letter says. They also note that the g-fee increase will hinder GSE reform– “as any effort to alter the GSEs' role in the market would result in a loss of federal revenue.”
