[Congressional Record Volume 148, Number 28 (Wednesday, March 13, 2002)]
[Extensions of Remarks]
[Page E340]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   REPEAL OF GINNIE MAE FEE INCREASE

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                          HON. JOHN J. LaFALCE

                              of new york

                    in the house of representatives

                       Wednesday, March 13, 2002

  Mr. LaFALCE. Mr. Speaker, yesterday, I introduced H.R. 3926, a bill 
to repeal the scheduled increase in the Ginnie Mae guarantee fee that 
is scheduled to take place in October, 2004. The purpose of this repeal 
is to prevent what amounts to an unwarranted and unnecessary tax 
increase on homeownership.
  The 1998 Higher Education Act Amendments included a provision 
unrelated to education which would prospectively increase by 50 percent 
the annual fee that the Government National Mortgage Association, also 
known as Ginnie Mae, charges each year on mortgage loans.
  Ginnie Mae facilitates an efficient secondary market for Federal 
Housing Administration, Rural Housing Service, and Veterans 
Administration single family mortgage loans, by guaranteeing the timely 
payment of principal and interest on such loans. In exchange for this 
guarantee, Ginnie Mae charges an annual fee of six basis points on each 
mortgage loan, which is generally passed along to the borrower. The 
risk is minimal, since Ginnie Mae's function is to advance funds in the 
case of default, for which Ginnie Mae is subsequently made whole either 
through restored mortgage payments or through the federal guarantee by 
FHA, RHS, or VA on the underlying mortgage loan.
  The Administration's fiscal year 2003 budget concludes, with regard 
to Ginnie Mae, that ``Fee collections, interest and other income are 
expected to exceed expenses by $834 million in 2002 and $808 million in 
2003.'' For the purposes of credit scoring, Ginnie Mae is projected to 
make a profit for the taxpayers [negative credit subsidy] of $398 
million in fiscal year 2003.
  Given the substantial profits that Ginnie Mae makes each year, and 
the low risk that is taken to make such profits, the 50 percent 
increase in fees from six basis points to nine basis points that is 
scheduled to take place in 2004 is both unnecessary and unwarranted. 
This scheduled increase would perpetuate a regrettable trend in recent 
years of diverting housing resources, such as FHA profits and Section 8 
rescissions, to non-housing purposes.
  Moreover, since the fee increase is likely to be passed along to 
borrowers, the effect will be to raise mortgage rates for low- and 
moderate income homebuyers, including notably veterans and rural 
residents. Over the life of a loan, this can translate into thousands 
of dollars of additional mortgage interest payments.
  Therefore, we should repeal this unnecessary and harmful tax increase 
on homeownership before it takes place. H.R. 3926 does precisely that.

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