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Congress Considers Raising GSEs’ Guarantee Fees

As the year comes to a close, details of the ""Middle Class Tax Cut and Job Creation Act"":http://rules.house.gov/Media/file/PDF_112_1/legislativetext/HR_1209.pdf are up in the air, and a few housing industry groups are speaking out about one aspect of the act.


The ""Mortgage Bankers Association,"":http://www.mbaa.org/default.htm the ""National Association of Home Builders,"":http://www.nahb.org/ and the ""National Association of Realtors"":http://www.realtor.org/ together composed a letter to Congress expressing concerns about a proposal to raise Fannie Mae and Freddie Mac's guarantee fees (g-fees).

The groups believe ""g-fee levels would be most appropriately addressed as part of a comprehensive housing finance reform"" rather than as a source of reve-


nue to assist in covering the cost of the proposed extension of the payroll tax cut.

""[I]t is counterproductive to divert g-fees away from their intended purposes of minimizing the Enterprises' risk exposure and ensuring the liquidity of the secondary mortgage market,"" they wrote.

The Middle Class Tax Cut and Job Creation Act currently calls for an average increase of 10 basis points for loans originated in the new year compared to loans originated in 2011.

""The Director shall prohibit an enterprise from offsetting the cost of the fee to mortgage originators, borrowers, and investors by decreasing other charges, fees, or premiums, or in any other manner,"" states the proposed bill.

The idea of raising the GSEs' g-fees was proposed a few months ago when the Joint Select Committee on Deficit Reduction was looking for ways for the government to cut $1.5 trillion in national debt.

At the time, Rep. Bachus ""stated"":http://dsnews.comarticles/rep-bachus-calls-for-higher-gse-guarantee-fees-cuts-in-housing-programs-2011-10-17 in a letter that ""the G-fees that the GSEs charge do not reflect the underlying risk of default that the GSEs have assumed.""

Bachus believed raising the fees would not only help to reduce the risk the GSEs pose to taxpayers but also ""help the private market compete on a level playing field.""

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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