Fannie Mae

Fannie Mae: Crapo Once Again Pleads For Dropping Of G-Fee Provision From Highway Bill by: Amanda Maher

There’s no doubt that America’s infrastructure is failing and is in dire need of significant investment. The House and Senate alike are scrambling for ways to fund the latest highway bill, including a grab-bag of miscellaneous revenue streams that may or may not have ever been intended to fund such projects.

Case in point: funneling the fees Fannie Mae and Freddie Mac charges to guarantee its loans (aka “g-fees”) to fund infrastructure improvements.

Senator Mike Crapo, R-Idaho, continues to lead the charge against doing so.

Late last week, Senator Crapo sent a letter to 13 fellow senators urging them to reconsider this provision of the highway bill. The g-fees, put in place in 2011, are set to decline by 10 basis points at the end of 2021. The “pay-for” inclusion in the Developing a Reliable and Innovation Vision for the Economy Act (“DRIVE Act”) would extend the g-fees through 2025.

The Senate Committee on Environment and Public Works has said that the four-year g-fee delay would generate $1.9 billion of the $47 billion needed to fund the DRIVE Act. Citing a report by GSE regulators, the Senate Committee said there is no compelling economic reason not to extend the fees as outlined in the pay-for provision. Base costs for the for the g-fees would remain steady under the provision; former FHFA director Ed DeMarco tried to raise the fees in 2013 but his successor, Mel Watt, halted that plan when he came to the helm.

Crapo and others have already called the use of g-fees in this manner a “budgetary gimmick” and a “backdoor tax” on homeowners. The fees are critical in protecting the GSEs from losses from faulty loans, but increasing or extending the g-fees effectively serves as an additional tax for those looking to refinance or buy a house.

“Each time guarantee fees are extended, increased and diverted for unrelated spending, homeowners are charged more for their mortgages and taxpayers are exposed to additional risk,” wrote Crapo in a letter co-signed by Senator Mark Warner, D-Virginia. Any increase or extension of g-fee standards should be used to repay taxpayers for the federal bailout—not for funding highway infrastructure or other unrelated federal programs.

The Senate’s first attempt at passing the DRIVE Act stalled this summer, when legislators were given just one day to review the 1,030-page bill.

The House has already shot down the prolonged g-fee provision in the version the transportation bill it passed, and by a wide margin (354-72), thanks to an amendment by Rep. Randy Neugebauer, R-Texas and Rep. Bill Huizenga, R-Michigan that struck the provision from the bill.

David Stevens, President and CEO of the Mortgage Bankers Association, commended the House for “its strong bipartisan vote to pass the Neugebaurer-Huizenga amendment and remove from the highway bill an extension of higher Fannie Mae and Freddie Mac guarantees that would have served as a tax on homeownership, as well as a harmful reduction in the dividend paid on Federal Reserve Bank stock.”

In his latest letter, Sen. Crapo reiterates the impact on homeowners but also acknowledges the impact it will have on broader housing finance reform efforts. “Attempts to increase or extend these fees makes it more difficult to reform our housing system and wind down Fannie Mae and Freddie Mac,” he writes.

Facing an impending Nov. 20 deadline, the Senate voted last Thursday to pass a temporary extension of the highway bill until it has time to reconcile its legislation with the DRIVE Act passed by the House. The new deadline gives the Senate until December 4th.

There remains no deadline for taking on more substantial housing finance reform.

Fannie Mae Bethany McLean
Fannie Mae