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