However not to be deterred, they are now proposing to use loan guarantee fees to bail out their failing student loan program. When are they going to use them for the legitimate purpose to increase GSE and FHA loan loss reserves to protect against future loan defaults which are coming?
GSEs to be the piggy bank?Lawmakers are mulling a plan to fund student loan relief with increasedguarantee fees that Fannie Mae and Freddie Mac charge to mortgagelenders.
What’s worse? A Student Loan BubbleAccording to a Reuters story, industry lobbyists are trying to pushback even though the GSEs are pushing for higher fees themselves tohelp their own finances.”
Congress’s last-minute deal in December tapped a 10 basis point increase in the G-fees to the tune of $37.5 billion over 10 years. The Mortgage Bankers Association, an industry group, calculates that the fee increase led to a 1/8 percentage point rise in mortgage rates, adding about $14 to the monthly payment on a $200,000, 30-year fixed-rate mortgage, or some $5,000 over the life of the loan.
Very low interest rates have helped mask the impact.
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Apparently political expediency trumps fiscal responsibility for the Obama
Administration and Democratically controlled Senate who came up with this idea:
“It’s one of the options,” said Democratic Senator Bob Casey, who authored the December compromise with encouragement from the Obama administration. “It’s another place to go look for some revenue.”