CUNA backs legislation to stop g-fee use as spending offset

Legislation that would prohibit the use of guarantee fees to offset unrelated federal spending has the full support of the Credit Union National Association (CUNA). Rep. Mark Sanford (R-S.C.) introduced the Risk Management and Homeowner Stability Act (H.R. 4893) Monday.

Government-sponsored entities (GSEs) Fannie Mae and Freddie Mac charge lenders guarantee fees, or g-fees, primarily to protect against credit-related losses in the mortgage portfolio. In 2011, those fees were raised by 10 basis points until 2021 to fund a two-month extension of the payroll tax.

“Using guarantee fees for purposes entirely unrelated to housing is not sound public policy,” wrote CUNA President/CEO Jim Nussle in a letter to Sanford. “The GSEs charge these fees specifically to offset the risk of guaranteeing payment of principal and interest on loans packaged into agency securities; artificially inflating these fees can elevate housing costs above natural rates, putting homeownership out of reach for many American families at a time when the housing market is still in recovery.”

“Additionally, this fiscal sleight of hand misallocates the costs and benefits of a particular federal program or investment,” Nussle added.

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