Gee, I just can’t get worked up about all this hoopla over G-Fees.
The mortgage origination community is ticked off over recent moves to increase guarantee fees on mortgages. The fee hikes, it’s argued, crush affordability for consumers, and will stomp on any resurgent housing market.
It’s a nice Henny-Penny argument. But just like in the fable, there’s little truth that the sky is falling.
Ed DeMarco, soon to be deposed at the Federal Housing Finance Agency (FHFA), wants Fannie Mae and Freddie Mac to start charging lenders more, to help pay for the explicit government guarantee that comes with buying mortgage loans. Part of the rationale is to stop letting the Fannie-Freddie Complex under-price the private market, because as long as it does so, there won’t be a private secondary market.
Yet, in increasing price by way of a fee, the government is purposefully making mortgages more expensive. Shouldn’t that be discouraged?
A lot of people in the mortgage and real estate industry seem to think so. They assert that new fees are really a tax, and that once the government starts imposing more taxes on home transactions, home buying will be ground out.
Bring In Da Noise
It’s the same argument that the real estate community has made for decades about conveyance fees. Realtors are a formidable political presence, but even they haven’t been able to convince anyone that transfer fees hinder home sales. That doesn’t stop them from yowling like they’ve just been kneecapped by a mobster whenever the issue comes up. But eventually they stop their complaining, and just get back to selling Tudors and Capes.
The reason the Realtors make such a noise is that they want everyone to see what a ruckus they can kick up over a relatively minor issue – so just think what will happen if lawmakers get it in their head to start escalating taxes on real estate. Say, for example, imposing a tax to fund a completely unrelated initiative, such as immigration reform.
That’s what happened earlier this month, when the U.S. House passed a bill that would raise G-fees on mortgages in order to pay for 50,000 more U.S. visas for immigrants working in the math, science and engineering fields. That bill now must be considered in the U.S. Senate.
But folks like David Stevens, president of the Mortgage Bankers Association, are crying foul, asserting that fees on real estate or mortgages should only be used for housing-related initiatives.
Stevens has to toe the party line, of course. But the government cannot rely on revenue being vertically restricted, as much as the rich would like to insist that taxes on them only be used for programs for the wealthy. That’s reality.
And here’s another dose of reality: Where expenses are high, costs get passed on to consumers. The FHFA also wants to shim up fees in states where judicial foreclosure costs are high. That affects states like Connecticut, where the average time for a property to make it through the foreclosure process in now almost two years.
Connecticut Attorney General George Jepson – who was a driving force in foreclosure settlement negotiations with national lenders a couple years ago – wrote to DeMarco on Nov. 26, arguing that the agency is punishing states that protect consumer rights.
But the FHFA’s primary mission has to be to protect the agencies under its charge, and if Fannie and Freddie are racking up expenses because of excessive foreclosure costs, then the states that impose those delays shouldn’t be surprised to find mortgages costing more in their borders. The one argument Jepson doesn’t even try to make is that the extra cost will injure housing sales.
It’s not a tax. It’s the price of doing business. Oh, gee – of course.
Vincent Michael Valvo is CEO of Agility Resources Group LLC. He can be reached at vvalvo@agilityresourcesgroup.com.
