Sherman Introduces Bipartisan Legislation to Prohibit “The Homebuyer Tax”
Washington, D.C. – Today, Congressman Brad Sherman (D-CA) and Congressman Lee Zeldin (R-NY), members of the House Financial Services Committee, introduced legislation that would permanently prohibit the use of guarantee fees or “g-fees” as a budget offset. The bipartisan Homebuyer Protection Act of 2019 would add a section to the Budget Act of 1974 permanently prohibiting the use of g-fees to offset unrelated spending.
“Past proposals have attempted to use g-fees to pay for unrelated government spending on the backs of homeowners,” said Sherman. “G-fees are charged to cover the credit losses and operating expenses of Fannie and Freddie, and they should continue to be used only for that purpose, they should not be used as a source of funding for unrelated federal projects. Anything else would amount to a tax on U.S. homebuyers.”
“G-fees are a vital tool to ensure that, should a taxpayer backed mortgage held by Fannie Mae or Freddie Mac fail, taxpayers and their hard earned money are not on the hook,” said Congressman Zeldin. “However, some in Congress have attempted to use these fees as a piggy bank. I’m proud to join my colleague Congressman Sherman to prohibit this practice and ensure g-fees are used solely to protect hard-working taxpayers.”
In the United States, over $1 trillion in new home mortgages are made each year. On average, about two-thirds of this mortgage lending is supported by financing from the three federally chartered government-sponsored enterprises (GSEs), Fannie Mae, Freddie Mac, and Ginnie Mae.
All three of the GSEs facilitate the bundling of mortgages into mortgage-backed securities, which are then sold to secondary market investors. Each entity guarantees the payment of the principal and interest on these securities and charges mortgage lenders a g-fee to compensate for the risk of mortgage borrowers defaulting on their loans.
A prohibition on Congress using g-fee increases as a budget offset would both prevent a new tax being levied on U.S. homebuyers as well as help preserve the safety and soundness of the GSEs. The bill is supported by the National Association of REALTORS® and the Mortgage Bankers Association.