Last week the Mortgage Bankers Association of America (MBA) applauded two bills that would repeal the Ginnie Mae 50% guarantee-fee increase scheduled to happen in fiscal year 2004.
The Association expressed its support for a bill introduced by Rep. John LaFalce (D.,N.Y.), HR 3926, proposing a roll-back of the slated fee hike.
Separately, the MBA also lauded the "Housing Affordability for America Act of 2002," which was introduced by Congresswoman Marge Roukema (R., N.J.). This proposed bill, HR 3995, includes a provision that would repeal the fee increase.
The raising of Ginnie Mae's annual fee, which would mean an increased cost for American homeowners of $30 million a year, is intended to raise the level of Federal receipts produced by the agency. According to a MBA release, there is really no financial basis for the fee hike because Ginnie is currently operating at a profit.
"Our position in terms of the increased fees is we see it as a tax on homeownership that would not result in any additional money being used for homeowners," said Kathy Gibbons, director for secondary and capital markets at the MBA.
Gibbons added that the increase would be particularly unfair if the cost is passed on to first-time homebuyers, or loans made out to Federal Housing Administration (FHA) homebuyers, because the Ginnie Mae program is actually generating a substantial amount of money for the government.
"The program is always operated in the black," said Gibbons. "Therefore there is no budgetary need for the money from the increase. The government should not be making more revenue for this service."
Other experts say that the government is already earning a premium with the six-basis-point fee already in place. This is especially true because even though there are some losses on defaulted loans, the bulk of the losses are picked up, not by Ginnie Mae, but by the FHA and the Department of Veterans Affairs (VA).
Despite the stated disadvantages of the hike, some analysts say that upping Ginnie Mae fees might improve the Agency's market share versus the Federal Home Loan Banks (FHLBs) because some mortgage originators would probably make a little bit more money by securitizing through Ginnie Mae rather than by selling to the Federal Home Loan Banks.
However, those who oppose the move said that with a 50% fee increase, homeowners might shy away, possibly resulting in the lessening of overall Ginnie Mae and FHA production, and therefore lowering the amounts of money that could be generated.
Will the repeal
There have been some doubts about the recent efforts to repeal the fee hike. According to some analysts, since revenues that could be derived from the increase have already been considered in the government's budget, the repeal would have to go through the usual budget allocation process.
Another factor that may deter the efforts is the fact that Representative Roukema is actually retiring from Congress at the end of this year so some market participants are wondering how much clout she would have to push the proposed Housing Affordability Act through.
Aside from this, usually bills that are introduced in March have a lot of competition making it through the legislative process to be enacted into law by October, when the Congress is expected to adjourn for the year. So the proposed law might not have a chance of being ratified unless the leaderships of both the House and the Senate make it top priority.
Aside from the fee hike issue, Ginnie Mae has also been in the spotlight with rival Freddie Mac's recent release of a study against GNMA Choice, a program that would allow Ginnie to securitize conventional mortgages for the first time ever. There are currently two pending Ginnie Choice legislative proposals.
The study, which was written by Wharton professor Dr. Susan M. Wachter, called the GNMA proposal "a poor public policy" and said that the proposal would cost taxpayers $1.9 billion over 10 years. Wachter said that "the proposal may provide benefits to private mortgage insurers and some lenders, but likely will do so at the cost of reducing long-term homeownership opportunities for underserved populations."
Analysts said that this move on Freddie Mac's part is simply a battle for turf.
"If Ginnie Choice is approved then Ginnie would have more opportunity to securitize, and therefore Freddie would have less (opportunity to securitize)," said a mortgage analyst. "Besides, $1.9 billion over ten years is a small cost to taxpayers considering the size of the government's budget."
Meanwhile, the MBA recently released the final report of its Task Force on Ginnie Mae Choice.
The task force said that although it does not support the Ginnie Choice legislative proposals currently pending in Congress, it supports the conventional mortgage guarantee authority for Ginnie Mae. In other words, the MBA supports broad legislative authorization for Ginnie to guarantee conventional mortgage loans but not anything that would be too program-specific, which is what the pending proposals are about.