A bipartisan group of Senators have introduced a budget point of order to prevent a government plan that would use funds from Fannie Mae and Freddie Mac to offset federal spending. Led by Senators Mike Crapo (R-Idaho) and Mark Warner (D-Virginia), a group of colleagues from the Senate Banking Committee introduced the bill, S. 752, today, in an effort to push Congress to get serious about exploring reform options for Fannie Mae and Freddie Mac, according to a press release.
Fannie Mae and Freddie Mac use guarantee fees as a risk management tool to protect against prospective credit losses from borrower defaults. Each time these fees are increased and diverted for unrelated spending by Congress, taxpayers are left exposed to additional risk and homeowners ultimately incur the cost, the lawmakers argued.
“Congress must get serious about reforming Fannie and Freddie and stop treating them as political entities,” Crapo said. “Any increase of guarantee fees should be used to protect taxpayers from mortgage losses—not used as an artificial offset for new government spending.”
According to the release, the more guarantee fees are used as offset, the harder it will become to implement needed reforms to the U.S. housing finance system because it increases the price tag of any legislation.
“Guarantee fees should be used to protect taxpayers from risk, but some want to increase these fees simply to create a piggy bank for Congress,” Warner said. “I have pushed repeatedly for true housing finance reform to end this system of private gains and public losses. Raiding Fannie and Freddie g-fees to pay for unrelated federal spending only makes that goal more difficult to reach.”
The proposed legislation would make a congressionally mandated increase of guarantee fees only to be used for deficit reduction and would not be scored as an offset. It would also continue to require a 60 vote threshold on a provision that spends more or reduces taxes and is offset with a guarantee fee increased because the fee would not be recognized as an offset.
The bill is co-sponsored by Senators Richard Shelby (R-Alabama), Jon Tester (D-Montana), Bob Corker (R-Tennessee), Heidi Heitkamp (D-North Dakota), David Vitter (R-Louisiana), Joe Donnelly (D-Indiana), Mark Kirk (R-Illinois), Dean Heller (R-Nevada), Tim Scott (R-South Carolina) and Jerry Moran (R-Kansas).