Payroll Tax Extension Omits G-Fee Hike

Here is my comment about this story. Just because Congress left the hike out–does not mean that Fannie, Freddie and FHA will roll back planned 10bp increases. They are already built into their budgets…

From National Mortgage News…

The House and Senate on Friday passed a $150 billion bill that extends a payroll tax reduction and unemployment benefits for 10 months without increasing guarantee fees on Fannie Mae and Freddie Mac loans.

In the search for ways to pay for the extension, a hike in g-fees was contemplated but then ultimately rejected. 

In December, Congress passed a two-month extension bill that was funded through a 10 basis point hike in guarantee fees. That increase is permanent and remains, much to the chagrin of the mortgage industry. For 10 years, Fannie and Freddie are required to charge this extra 10 bps to cover the $35 billion cost of the short 2-month extension bill.

Fannie and Freddie will pass that cost onto lenders who in turn will make borrowers pay for it.

The fact that another g-fee hike was even considered shows the difficulty the two parties have in finding ways to fund critical government programs. “It will come up again and again,” said one lobbyist said, adding that the industry must be ready to block it.

Housing and mortgage trade groups have told Congress they oppose using g-fees as a source for funding other government programs. “We are united in opposition to increasing g-fees,” 19 trade groups said in a joint letter, unless it is for “shoring up” the GSEs’ capital reserves and “ensuring the liquidity of the secondary mortgage market.”

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: