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CUNA Backs Legislation to Stop Guarantee Fee as Spending Offset
Thursday, April 14, 2016 6:40 AM

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

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.