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Sherman Introduces Legislation to Prohibit Homebuyer Tax

February 7, 2017

Washington, D.C. – Today, Congressman Brad Sherman, a senior member of the House Financial Services Committee, joined Congressman Mark Sanford (R-SC) in introducing legislation that would permanently prohibit the use of guarantee fees (g-fees) as a budget offset.

The bipartisan Risk Management and Homeowner Stability Act, would add a section to the Budget Act of 1974 permanently prohibiting the use of g-fees to offset unrelated spending.

Government-sponsored enterprises, like Fannie Mae and Freddie Mac, buy mortgages from lenders and bundle them into mortgage-backed securities (MBS) that they then sell. Fannie Mae and Freddie Mac guarantee the payment of the principal and interest on these securities and charge g-fees on mortgage lenders in order to protect against losses from faulty home loans.

"Past proposals have attempted to use g-fees to pay for unrelated government spending on the backs of homeowners," said Sherman. "G-fees are a critical risk management tool, and they should continue to be used only for that purpose."

Typically lenders pass on the cost of these g-fees to consumers, so the use of these fees for anything other than their intended purpose amounts to a tax on homebuyers.

"Using g-fees to pay for unrelated spending means that homeowners become a de facto national piggy-bank for Congress, which neither works for the taxpayer nor the homeowner. This bill simply ensures that the promise that came when these fees were created is the promise kept," said Sanford.