WASHINGTON, March 14 (Reuters) - A bipartisan group of U.S. senators on Thursday introduced a bill to prevent the government from using fees collected by housing-finance giants Fannie Mae and Freddie Mac to pay for other government programs.
Aiming to prevent Congress from using them as a piggy bank, the bill would prohibit increasing the “guarantee fee” that the two government-owned firms charge lenders and in turn use the funds generated to cover unrelated federal spending.
In a show of agreement on an issue where bipartisanship is rare, the group of four senators sponsoring the bill said they wanted to spur debate on how to reform the two so-called government-sponsored enterprises, or GSEs.
Fannie Mae and Freddie Mac, which provide the financing for about two-thirds of all new U.S. home loans, have soaked up $131 billion in taxpayer aid since being seized by the government at the height of the financial crisis in 2008.
Republicans and Democrats agree the two firms should eventually be wound down, but they have yet to resolve disagreements over what should replace them and how extensive a role the government should play in supporting housing.
“Reforming a broken housing finance system and protecting taxpayers is a win-win, and we can begin that effort with this bipartisan GSE reform proposal,” Republican Senator David Vitter, one of the co-sponsors of the legislation, said in a statement.
“This bill shows that Republicans and Democrats do agree on the urgency required to reform the mortgage finance system,” he said.
Vitter is sponsoring the bill with fellow Republican Senator Bob Corker and Democrats Elizabeth Warren and Mark Warner.
Other aspects of the measure would prevent the Treasury Department from selling its preferred shares in the two firms without permission from Congress and without progress on structural housing finance reform.
“It is past time to reform Fannie and Freddie. That means removing the obstacles and starting a bipartisan effort to take on housing finance reform this Congress,” Warren said in the joint statement.
The two firms do not directly make loans. Instead, they purchase mortgages from lenders, which they either keep on their books or bundle into securities for sale to investors with a guarantee. Those investors pay Fannie and Freddie a “guarantee fee” when they buy the securities.
“We believe that as we transition Fannie and Freddie out of their present roles, we need to think about the system in its entirety. The guarantee fee should not be mixed with other funding needs,” said Warner.
Congress has attempted to tap the “g-fee” in the past. One proposal, which failed, would have used the fees to fund cleanup of Gulf Coast damage caused by the 2010 BP oil spill. The most recent effort increased the fees to cover the cost of a two-month extension of the payroll tax reduction at the end of 2011.
The regulator for Fannie Mae and Freddie Mac, the Federal Housing Finance Agency, is already increasing the g-fees as part of an effort to wind down the companies and lure private lenders to enter the market.