RPAC Scores a Win for Home Buyers!11/16/2015
While the issue is not completely dead, Realtors did score a win thus far in our latest Call to Action.
Our latest Call to Action was to tell Congress not to use the GSE g-fees to fund the latest Highway Bill. Did I lose you already? I was half trying to! As a Realtor out there every day working hard for home buyers, I would be surprised if this latest “cause” made any sense to you at all. But this is Congress and we see items like these that seem so esoteric as to slip through the cracks. All the more important it is then that we have excellent staff at the National level to keep an eye on these legislative matters.
Over 20% of our membership responded to this call, and while we would like to see a higher percentage, it was a good turnout. Nationally, we also had a good turnout and our Congress definitely got the word. Language in the current legislation taking g-fees for the Highway Bill was removed. The Bill is currently going into conference between the House and Senate for final resolution and we are monitoring it carefully to keep the g-fee funding out. GREAT JOB Realtors!
But (and I saved this for last), you can say “SO WHAT, NELS!!!” What the heck is this anyway and why should I care about it. If you are part of the 80% who did not take action, you might even say, “glad I stayed out of this fight”. Who the heck cares anyway? What the heck is a g-fee? And stop using acronyms like GSE! SO WHAT, NELS!
Well, let me tell you. The GSEs are Fannie Mae and Freddie Mac. Taken into receivership by the federal government back in the Bush administration they each borrowed somewhere between $75- 90 Billion. To date the government has collected back more than that but their agreement stipulates and funds received back to the federal government does not go toward debt repayment (interesting to say the least) and that neither company can lobby the government.
The g-fee (guarantee fee) is roughly a quarter of one percent (0.25%) of the monthly interest charge paid by the consumer and then paid to the GSE to guarantee the loan to investors. If a consumer is delinquent in paying their loan back, the GSE uses the g-fee to make the investor whole. I just found out this week that Congress has already taken 10 basis point of this, or 40% of the fee, and used it to fund a payroll tax holiday through 2021.
So, that helps define the problem but let’s get to the issue. As Congress works to pay for its legislation without raising taxes, they are looking for new ways to pay. What they have found is a new “bank” in the GSEs. The problem is this is money that funds housing. How does it do that? The g-fee is part of the interest consumers pay on their mortgage loan. If that money is taken from the GSEs and used for other initiatives, then interest rates will have to rise to cover delinquencies and defaults. In better financial times these g-fees may accumulate as they are not needed, but should markets turn, they become more important to maintaining the quality of mortgage investing. If mortgage investing becomes more risky because investors are taking the delinquency risk, then investors will demand a greater return on their risk and interest rates rise. Better yet, if there is a surplus of g-fees, then it should be returned to the consumer through lower interest rates rather than consumed for non-housing.
So that is it in a way-too-big nut shell. Congress has already raided 40% of this pot of money for non-housing related initiatives. We will need to be on watch as NAR believes Congress will continue to return to this well for funding. Hopefully, if you did not understand this issue before, I have made it a bit more understandable and you will be ready for the call next time. If some of this makes you scratch your head and wonder about our GSEs and how they are being managed in receivership, NAR is actively working that as well. It is one of the bigger issues that will probably take years to work through. Of course NAR is focused on preserving the 30 year fixed rate mortgage and a competitive interest rate for our home buyers and this GSE discussion is part of that initiative.
Your involvement is key to our success. Your RPAC contributions go toward these initiatives and your response to the Call for Action also is key to our wins. Congress sees that we are active in the legislative process both by our willingness to contribute funds and also by our willingness to act. NAR has made it easy for us to email our Representatives. And, they note that it is THEIR constituents that are raising their voices. Yes, it is a standard form and they do not read every one, but they can count! And they see NUMBERS. The standardize responses you send are followed up by our staff in DC as well as local members, like myself, who specifically get in touch with our Reps and provide a more in-depth discussion of our concern like I have done here. We tell the “story” so that they can understand where NAR as a whole is coming from and why it is important to their constituents. That story backed by our active membership gives us the clout to be successful.
So, for all of us Realtors, please accept our sincere gratitude for making your individual voice heard through your contributions and actions so that we can protect our livelihoods and our home buyers.
Nels Petersen, Realtor
2015-2016 MLSOK Board President
Federal Political Coordinator for NAR to Rep. Steve Russell, OK-05
2015 Sterling R President’s Club Contributor