Congress’ plan to raise Fannie, Freddie fees to jeopardize national housing market?

TRD New York /
Dec.December 12, 2011 06:58 PM

The bi-partisan proposal in Congress last week to hike fees charged by mortgage giants Fannie Mae and Freddie Mac is a “short-sighted,” “counterproductive” threat to the fragile housing recovery and not how the funds were intended to be used, Bob Nielsen, chairman of the National Association of Home Builders and a home builder with Reno-based Shelter Properties, said in a statement today.

The proposal would raise the guarantee fees charged by Fannie and Freddie each time a mortgage is originated. As Fannie and Freddie re-package and sell securitized loans to investors, those fees cover the risk that borrowers will default. Many in the real estate industry say that increasing those fees amounts to an added tax on homebuyers, as lenders will pass the fees on to borrowers. The money will be used to fund an extension of the payroll tax cut through 2012.

“Congress is tampering with [guarantee]-fees and needlessly raising the cost of buying a home,” Nielsen said. “This will jeopardize the tenuous rebound and is the last thing this economy needs.”

The Senate proposal would raise fees by one eighth of one percent over the next two years. Last year, those fees averaged around one-quarter of one percent of the loan amount, according to the Wall Street Journal.

The proposal also would re-route the money, sending funds straight to Fannie and Freddie’s effective owner, the Treasury, according to the Journal.

Some analysts note that mortgage rates are so low that increased fees would be a negligible increase in the total cost of a mortgage.

Home prices in the U.S. decreased by 1.3 percent in October, in their third straight month-over-month decline, according to data from real estate analytics provider CoreLogic, which The Real Deal previously reported. With housing nationally on such tenuous footing the proposed fee hike has not been popular in the real estate industry. The Mortgage Bankers Association and the National Association of Realtors have called the proposal “counterproductive,” according to the Journal.

“The guarantee fees … should not be used for purposes unrelated to the safety and soundness of the housing finance system,” Neilsen said.

The fee hike should raise $38 billion in revenue over 10 years, according to budget projections, the Journal indicated. — Guelda Voien


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