The mortgage industry has taken one for the team in the way the payroll tax reduction extension has been funded, at least partially, by an increase in government housing agency guarantee fees. But in my view, once is more than enough.
No doubt there was some kind of link made that, since the industry started the recession, it is only fair it should be made to pony up financing for the recovery (the payroll tax reduction being a stimulus measure).
So we have a 10 basis point increase in the g-fee, with the anticipation of another hike after April 1.
However, that's the wrong way to look at the situation. This extra tax on mortgages will only serve to keep a depressed industry down. Housing led the industry into recession, and it can lead the economy into a more robust recovery.
So, Congress should not demand even more of an increase in g-fees. Taking one for the team should be a one-off situation.
The payroll tax reduction extension, which was put into place for only two months, should be extended for the full year (it is highly stimulative to the economy), but any money needed to offset the loss in tax revenues can come from someplace else.
The provision that Fannie Mae and Freddie Mac should charge the same g-fee to its seller-servicers is problematic, as well.
The agencies have long discounted g-fees to their best customers. There's nothing wrong with that, as that is how private firms customarily work. The GSEs have operated for decades as public-private hybrids. Charging the same fee to everyone smacks of a stronger government grip on the agencies.
Meanwhile, the mortgage industry stays in the doldrums despite extravagantly low interest rates and widely retrenched housing prices. It could use more lift in helping it regain its former vivacity. The government has moved to make refinancings easier, but what about the purchase market? A revival of the single-family housing tax credit would get a lot of fence-sitters off the rail and into purchase mortgages.
Nobody is in favor of new spending these days, but the fact is that a “normal” mortgage market (not the overheated one of the early 2000s) would generate a lot of stimulus to related industries, and that ought to translate into extra revenue for the feds as it did during the 1990s.
