As members of AMLA, we are providing you with this call to action to ensure that you are aware of events taking place, and additionally, request that you take action. There is a piece of legislation that has grown legs, has gained much support and is moving too fast without taking into consideration the harm that it will cause to the housing industry.
The failed, and now defunct, Congressional Super Committee originally proposed the use of the Government Sponsored Agencies (GSEs) in their efforts to reduce the $1.2 Trillion budget deficit. This idea has again resurfaced, specifically to sustain and extend the payroll tax cut. This legislation would allow for an increase between 10-12.5 basis points in the guarantee fees (G-Fees) paid to the GSEs, namely Fannie Mae (FNMA) and Freddie Mac (FHMLC). This increase would be used to pay for the $38 Billion payroll tax cut extension over the next 10 years. As David Stevens, President of the MBA, has stated, “using the GSEs as piggy banks for tax policy is a slippery slope.” We need your help fighting this piece of legislation. Below you will find bullet points for your review, and as speaking points. If you would like more detailed information, please contact Don Hagan (hagan1don@aol.com or Jannine Bielesch (jannine.bielesch@usbank.com).
- First, this increase will be directly passed on to the borrower, and will result in a higher cost for them to finance a new mortgage. While the economy and housing market is still in recovery, increasing the costs for the borrower is not the best plan to put into place.
- Second, it is a very dangerous initiative to increase the cost of homeownership to support some other part of the government.
- Third, GSE reform is still on the table. As both FNMA and FHMLC are in Government conservatorship there are diligent efforts being made to wind these two giants down, and once again privatize the market. This new legislative initiative is being set up for failure if in a few years the GSE are no longer in existence, as is currently being planned.
- Fourth, there are currently too many other regulations/rulings/legislation that are as yet undecided which will greatly affect the industry and the costs to the homeowner. For example, a final ruling on the definition of QRM, establishment of National Servicing Standards, FHFA’s proposal to increase the G-Fees, and GSE reform just to name a few. The manner in which these issues are resolved will change the GSE, their cost and the costs passed on to the servicer, securitizer, originator and ultimately the borrower. Until these are decided upon and enacted, it seems as though Congress would be putting the cart in front of the horse with this new piece of legislation.
If Congress does not act, the payroll tax cut is scheduled to increase by two percentage points, to 6.2 percent from a rate of 4.2 percent – which would effectively increase taxes by $1,000 for the average family next year. It is not in dispute that this is a serious problem, however, it is not one that should be solved on the back of the housing industry. This is moving quickly, and has support by both Republicans and Democrats. Please do not just delete this email. This industry and every homeowner needs you to do something! Please educate your partners in the industry and call your district representative today!
