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Bachus Calls for Higher Guarantee Fees, Cuts in Housing Programs

Republican members of the House Financial Services Committee point to the GSEs and the Obama administration's housing programs as areas for the Joint Select Committee on Deficit Reduction to examine as it works toward cutting $1.5 trillion of the nation's debt.


A letter drafted by ""Chairman Spencer Bachus"":http://bachus.house.gov/ (R-Alabama) and signed by 20 Republican committee members first calls for an increase in the GSEs' guarantee fees (or G-fees) on the grounds that the GSEs charge much less to guarantee loans than their competitors in the private market â€" transferring greater risk to the government and taxpayers while also crowding out the private market.

""Unfortunately, the G-fees that the GSEs charge do not reflect the underlying risk of default that the GSEs have assumed,"" the letter asserts.

According to the letter, ""Raising G-Fees will help the private market compete on a level playing field, reduce Fannie Mae's and Freddie Mac's market share over time, and limit taxpayer exposure from the GSE conservatorships.""

So far, the Obama administration has proposed increasing the fees by 10 basis points â€" one-tenth of one percentage point â€" but this would leave them still ""significantly lower"" than fees charged in the private market.

Bachus specifically mentions a bill introduced by Rep. Randy Neugebauer (R-Texas) which calls for a gradual


increase in G-fees over a period of two years. The bill, Bachus says, will ""raise revenues, reduce the government's role in the secondary mortgage market, and protect taxpayers from further bailout expenses far sooner than the Administration's plan.""

The second recommendation to reduce expenditures calls for reforming the ""National Flood Insurance Program"":http://www.fema.gov/about/programs/nfip/index.shtm (NFIP).

Bringing the program's premiums in line with its liabilities would reduce the deficit by absorbing some of the program's $18 billion in debt, according to Bachus.

While the Obama administration also calls for reform to the NFIP, its plan would use the increased premiums to offset new spending. Bachus and the Republican committee members suggest using the increased income to pay down the program's current debt instead.

Bachus also makes several recommendations regarding the ""Department of Housing and Urban Development"":http://portal.hud.gov/portal/page/portal/HUD (HUD) and several of Obama's housing programs.

The letter points out that despite reports of ""waste, fraud, and abuse"" within the department, HUD continues to see yearly increases in its budget. ""The Joint Select Committee should therefore scrutinize the HUD budget closely for potential savings,"" Bachus advises in the letter.

He calls for an elimination of the Neighborhood Stabilization Program, which was created to help neighborhoods that have experienced high foreclosure rates, and he suggests considering the elimination of funding for ""NeighborWorks America,"":http://www.nw.org/network/index.asp a national network of nonprofit organizations dedicated to affordable housing and foreclosure mitigation counseling.

The ""Home Affordable Modification Program"":https://www.hmpadmin.com/portal/index.jsp (HAMP) was also targeted in the letter as Bachus advised the Joint Select Committee on Deficit Reduction to ""consider rescinding unspent and unobligated amounts committed to HAMP.""

Bachus also called for a review of the Dodd-Frank Act, which he labeled the ""most significant impediment to economic growth"" within the committee's authority.

About Author: Krista Franks Brock

Krista Franks Brock is a professional writer and editor who has covered the mortgage banking and default servicing sectors since 2011. Previously, she served as managing editor of DS News and Southern Distinction, a regional lifestyle publication. Her work has appeared in a variety of print and online publications, including Consumers Digest, Dallas Style and Design, DS News and DSNews.com, MReport and theMReport.com. She holds degrees in journalism and art from the University of Georgia.

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