Giving Compass' Take:
- Michael Stegman suggests that guarantee fees should be repurposed to narrow the racial homeownership gap and make housing more affordable.
- How can guarantee fees be utilized to fund "human infrastructure" and promote racial equity in housing?
- Learn more about narrowing the racial homeownership gap.
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With the Senate seeking to finalize a proposed bipartisan $1 trillion infrastructure bill before leaving on August recess, one large question still looms: how to pay for it. One idea proposed by the Environment and Public Works chairman would be renewing and redirecting a portion of Fannie Mae and Freddie Mac guarantee fees (g-fees) toward infrastructure. But doing so will significantly reduce the Biden administration’s capacity to harness the enormous potential of Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs), to achieve its racial equity goals.
In 2011, Congress imposed a temporary 10-year, 10 basis-point (0.1 percent) tax, a boost in the g-fee, on new home loans acquired by Fannie Mae and Freddie Mac, remitted to the US Treasury at end of each quarter until October 1, 2021. Now, with less than two months before the g-fee’s lapse, lawmakers have suggested repurposing the fee to raise an estimated $21 billion over a 10-year extension, less than 4 percent of the new money needed to fund the deal.
In a recent blog post, I suggested an alternative scenario where the acting director of the Federal Housing Finance Agency (FHFA), in her capacity as conservator of the GSEs, could retain and redirect this expiring fee to support affordable housing and underserved market priorities. By taking this route, the g-fee could be repurposed to fund a part of the “human infrastructure” that the administration has also championed.
Instead of extending the tax for reasons unrelated to housing, the g-fee can support affordable housing by helping hundreds of thousands of families with down payment grants, creating short-term wealth-building mortgages, providing liquidity to lenders who want to narrow the racial homeownership gap, and expanding homebuyer education and preventive servicing programs to increase sustainable homeownership.
Read the full article about racial equity in housing by Michael Stegman at Urban Institute.