Home Owners Shouldn’t be Washington’s Personal ATM

Washington’s inability to put aside partisan politics and solve long-term problems is placing home owners in harm’s way again. Searching for a means to extend the payroll tax cut that expires at the end of the month, Congress is considering charging home buyers and owners higher Fannie Mae and Freddie Mac loan fees, known as guarantee fees.

Fannie and Freddie charge g-fees to cover their losses when home owners default on their loan. In turn, lenders pass these costs to home owners when they refinance. 

To pay for just a two-month extension through February, the last increase raised the fee for the next 10 years. That increase added 10 basis points (that’s 1/10th of 1%) to the g-fee, which doesn’t sound like much until you add it up over the life of a typical loan. For a home owner with a $200,000 mortgage, a 10-basis point increase that’s passed along in their interest rate adds $4,000 to $5,400 over 30 years.

Raising g-fees won’t help the economic engine of the recovery: the housing market.

Leading economists say Americans shouldn’t expect a robust economy until the housing market returns to health. This shouldn’t come as a surprise. Housing sales generate demand for furniture, remodeling, and other goods and services, adding more fuel to the economic revival. In past recessions, a rebound in housing has been one of the first signs that economic conditions are improving.

Politicians from both sides are looking for ways to help the housing market. In his State of the Union speech, President Obama called for eliminating red tape for home owners with his proposed refinance program; Sen. Johnny Isakson’s (R-Ga.) proposed Home Act would allow financially troubled home buyers to withdraw funds from their retirement accounts to make mortgage payments.

Instead of joining such efforts, Congress is making home ownership more expensive by looking to home owners to raise revenue. Members of Congress need to remember that home owners aren’t their ATM.

Rather, Congress should do no harm when it comes to housing. As much as the market has improved in recent months, it remains in precarious balance. If Congress levies additional fees on home owners, that revenue should be used to help the housing market. Tapping home owners to pay for non-housing-related spending isn’t right.

Americans are fighting to ensure their kids have the chance to attend college, support their families, and buy a home. Allowing Congress to saddle middle-class home owners with additional fees is a step backward.

What do you think of an increase in loan guarantee fees to support a payroll tax extension?