Senators say practice is a back door tax on homeowners
Washington, D.C. - U.S. Senators Mike Crapo (R-Idaho) and Mark Warner (D-Virginia) led a bipartisan group of their colleagues on the Senate Banking Committee today to introduce a budget point of order to prevent the Senate from using Fannie Mae and Freddie Mac from financing unrelated spending. The bill, S. 752, is co-sponsored by Senators Richard Shelby (R-Alabama), Jon Tester (D-Montana), Bob Corker (R-Tennessee), Heidi Heitkamp (D-North Dakota), David Vitter (R-Louisiana), Joe Donnelly (D-Indiana), Mark Kirk (R-Illinois), Dean Heller (R-Nevada), Tim Scott (R-South Carolina) and Jerry Moran (R-Kansas).
Guarantee fees are charged and used as a risk management tool by Fannie Mae and Freddie Mac to protect against prospective credit losses from borrower defaults. Each time these fees are increased and diverted for unrelated spending by Congress, taxpayers are left exposed to additional risk and homeowners ultimately incur the cost in their mortgage bills. Additionally, the more guarantee fees are used as offset, the harder it will become to implement much-needed reforms to the nation's housing finance system because it increases the price tag of any legislation.
"Congress must get serious about reforming Fannie and Freddie and stop treating them as political entities," said Crapo. "Any increase of guarantee fees should be used to protect taxpayers from mortgage losses-not used as an artificial offset for new government spending."
"Guarantee fees should be used to protect taxpayers from risk, but some want to increase these fees simply to create a piggy bank for Congress," said Warner. "I have pushed repeatedly for true housing finance reform to end this system of private gains and public losses. Raiding Fannie and Freddie g-fees to pay for unrelated federal spending only makes that goal more difficult to reach."
Specifically, the legislation would make the following stipulations:
· A Congressionally mandated increase of guarantee fees can only be used for deficit reduction and will not be scored as an offset
· A 60 vote threshold would still be required on a provision that spends more or reduces taxes and is offset with a guarantee fee increased because the fee would not be recognized as an offset
Crapo and Warner are also looking to include the measure in upcoming budget negotiations as a way to advance the important legislation.