As many Americans know, our national budget has a yearly deficit. These deficits have placed many lawmakers into situations that resemble a not so comfortable space in between a rock and a hard place. This results in many discussions over the budget each year, and in some cases, a government shut down until a path is chosen for the country. On March 6, 2020, 33 organizations sent a letter to multiple lawmakers that could have significant impacts on the decisions of the housing market for not only fiscal year 2021 but over 10 years later.
The topic of the letter focused around “g-fees”, or also known as guarantee fees within the “GSEs” (Fannie Mae and Freddie Mac). These g-fees, “cover projected credit losses from borrower defaults over the lifetime of the loans, administrative costs, and a return on capital” according to the Federal Housing Finance Agency.
When these g-fees are hoisted up, like in 2011 to fund a two-month payroll tax relief period, it raises the cost of homeownership nationwide for 10 years. The letter gives the example of a “10 basis points [raised] in g-fees amounts to an additional $5,100 in mortgage payments on the average GSE loan amount of $255,000.” In short, homeowners or those looking to get a mortgage loan would almost instantly see an increase in how much they would pay if g-fees were raised.
Besides laying out the details of how g-fees function, the letter also focused on this cohort’s logical objection for not raising g-fees. These organizations stated they “firmly believe that g-fees should only be used as originally intended: as a critical risk management tool to protect against potential mortgage credit losses.” and not used to fund non-housing related programs and becoming the nation’s “piggy bank”.
If you are a homeowner, or can be impacted by mortgages in any situation, it might be time to start saving or speak up. This is a current issue as the president’s proposed budget for fiscal year 2021 suggests using g-fees again to help fund loses in the budget.
These are the organizations who are asking for this reconsideration through their letter:
American Bankers Association
American Escrow Association
American Land Title Association
Asian Real Estate Association of America
Center for Responsible Lending
Community Associations Institute
Council for Affordable and Rural Housing
Credit Union National Association
District of Columbia Association of REALTORS
Enterprise Community Partners, Inc.
Housing Policy Council
Independent Community Bankers of America
Institute of Real Estate Management
Leading Builders of America
Manufactured Housing Institute
Mortgage Bankers Association
National Apartment Association
National Association of Federally-Insured Credit Unions
National Association of Home Builders
National Association of Housing Cooperatives
National Association of Real Estate Brokers (NAREB)
National Association of REALTORS®
National Community Reinvestment Coalition (NCRC)
National Community Stabilization Trust
National Council of State Housing Agencies
National Fair Housing Alliance
National Housing Conference
National Housing Resource Center
National Multifamily Housing Council
National NeighborWorks Association
The Community Mortgage Lenders of America
The Realty Alliance U.S. Mortgage Insurers