Don't raise Fannie and Freddie fees, lawmakers urge

by Ryan Smith09 Dec 2013
Senate Banking Committee leaders are urging fellow lawmakers not to raise loan-guarantee fees charged by Fannie Mae and Freddie Mac to generate revenue.

Fannie and Freddie charge the fees to cover potential losses on mortgages they insure, and the cost of the fees is generally passed along to the consumer. But as Congress tries to reach a budget agreement, raising the fees could be attractive to some lawmakers because they can be considered government revenue. In 2011, Congress paid for a short-term extension of a payroll tax by hiking the guarantee fees 0.1 percentage points, according to a Wall Street Journal report.

But in a Thursday letter to the Senate Budget Committee, Banking Committee Chairman Tim Johnson (D-S.D.) and Ranking Member Mike Crapo (R-Idaho) urged Senate budget negotiators not to include a fee increase in any budget proposal.

“The guarantee fees are charged to cover losses incurred by Fannie Mae and Freddie Mac,” they wrote. “Each time they are increased and diverted for unrelated spending, homeowners are charged more for their mortgages and taxpayers are exposed to additional risk. Also, each of these offsets makes reforming Fannie Mae and Freddie Mac more difficult because it increases the price tag of any legislation.”

Johnson and Crapo, who are currently working on bipartisan legislation that would wind down Fannie and Freddie as part of a comprehensive attempt at housing market reform, also coauthored an amendment to the Fiscal Year 2014 Budget Resolution that would prohibit the Congressional Budget Office from including the guarantee fees in any financial offsets.

“This prohibition is particularly important because we are currently working to reform the housing finance system and wind down Fannie Mae and Freddie Mac,” they wrote. “Any use of guarantee fees as offsets would make that effort more expensive for taxpayers and could limit our ability to achieve real reform.”

Industry groups have also lobbied against the use of the fees to offset the cost of other legislation.

“The National Association of Realtors strongly opposes the use of guarantee fees for any use other than intended purpose,” NAR wrote in a 2012 brief. “We understand, and appreciate the need to bring financial relief to the middle class, but effectively imposing a tax on housing is not prudent given the instability of the housing sector.”


  • by Jim | 12/9/2013 8:48:16 AM

    So they are working to wind down Fannie and Freddie but the one way that Fannie and Freddie are using to both protect the taxpayer and to price their product higher to encourage a private market is not acceptable. Amazing

  • by Bruce | 12/9/2013 11:46:00 AM

    Maybe I'm missing something - I thought Fannie and Freddie were making billions and paying back most of the money it received from the government. Now there's a possibility of raising the fee to generate more revenue. I wish the government would practice full disclose and provide a detailed list of where the money is actually going.

  • by Charles | 12/9/2013 4:27:03 PM

    Here is the scam of scams...while Fannie & Freddie are no profitable & solid as they have been for 90% of their existence. The government is not returning this money to tax payers who footed the bill. They are keeping it as "dividends" since they have imposed themselves a s Fannie & Freddies largest shareholders.


Should CFPB have more supervision over credit agencies?