GOP lawmakers urge Watt to hike g-fees

by Ryan Smith09 Jan 2014
Three Republican lawmakers are urging the regulator of Fannie Mae and Freddie Mac to increase mortgage guarantee fees as previously scheduled.

In a letter to newly appointed Federal Housing Finance Agency Director Mel Watt, Reps. Scott Garret (R-N.J.), Randy Neugebaur (R-Texas) and John Campbell (R-Calif.) urged Watt to rescind his decision to delay implementation of the fee increases.

The guarantee fees, or g-fees, are charged by Fannie and Freddie to cover potential losses. Watt’s predecessor, then-acting FHFA Director Edward DeMarco, announced last month his intention to hike the fees by an average of 11 basis points – a move that brought near-universal condemnation from the mortgage industry, as the cost of the fees are inevitably passed on to borrowers.

Watt, however, said he would delay the fee hikes until he had a chance to evaluate their impact.

“The implications for mortgage credit availability and how these changes might interact with the new qualified mortgage standards could be significant,” Watt said. “I want to fully understand these implications before deciding whether to move forward with any adjustments to g-fee pricing.”

The congressmen, however, wrote that the g-fee hikes were an important part of the effort to lure private capital to the mortgage industry.

“Over the past five years, FHFA has repeatedly directed (Fannie and Freddie) to adjust guarantee fee pricing to eliminate situations where one group or segment of the mortgage market subsidizes another,” they wrote. “These distortions, as well as the excessively low overall level of (Fannie and Freddie) guarantee fees, are major factors in discouraging the return of private capital to the mortgage market.”

The congressmen cited the Temporary Payroll Tax Cut Continuation Act of 2011, which stated that the FHFA director should provide for uniform pricing among lenders, make pricing adjustments based on risk and consider conditions in financial markets when adjusting g-fees.

“The announced guarantee fee changes accomplish all of these objectives, and fulfill the clear intent of Congress as stated in this law,” they wrote. “We urge you to allow these changes to proceed as scheduled."

The Temporary Payroll Tax Cut Continuation Act of 2011, incidentally, extended an expiring tax cut for two months. The extension was paid for by raising g-fees.
 

COMMENTS

  • by Chris | 1/9/2014 9:54:01 AM

    did anyone see the proposed changes? borrowers getting penalized interest rates-wise all the way up to a 780 credit score. So, someone who has perfect credit, never had a late payment in their life with a 779 middle score - does NOT qualify for the best possible mortgage, too risky

  • by Cheryl M | 1/9/2014 10:01:56 AM

    Don't do it!! All they are look for is more money to support their recent extension of unemployment insurance. Somehow the mortgage industry seems to be the support for all these extensions and rate hikes, fee hikes enough is enough. Watt be smarter than that, the mortgage industry is still paying for the BP oil spill from some of the last rate hikes by the GOP. Congress needs to find at another industry to suck the life out of. Or maybe stop the extensions and create jobs for those unemployed.

  • by Bob VG | 1/9/2014 10:02:42 AM

    Republican idiots.
    Private investors will/are returning offering programs that allow self employed home ownership as well as Jumbo borrowers more attractive financing.
    Let's kill the middle class completely---mantra of Politicians on both sides.

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