Trade groups are responding to Congress’ budget reconciliation and a housing regulator’s call for innovative product ideas with reasons to tread lightly and potentially even roll back guarantee fees.

G-fees or loan-level price adjustments that two influential government-sponsored enterprises charge when they buy mortgages from lenders have historically been among methods legislators have used to generate revenue and reduce deficits.

But Treasury Secretary Scott Bessent, Federal Housing Finance Agency Director Bill Pulte and President Trump all generally want long-term interest rates to fall, so they also have cause to avoid hiking government-related loan fees or even considering cutting them.

How g-fee hikes could affect borrowing costs

The Community Home Lenders of America warned Congress of the negative impact higher g-fees could have on rates Tuesday and the same day, the National Association of Mortgage Brokers suggested relief in this area to Pulte in response to his call for feedback on X.

CHLA Executive Director Scott Olson called increasing government-related loan fees a potential “step backwards” in efforts to improve U.S. housing while NAMB President Jim Nabors recommended the removal of higher ones on certain loan types to bolster affordability.

Nabors seeks an end to LLPAs on second home and investor loans, calling these a disincentive to “responsible buyers from purchasing second homes that may serve as future retirement residences, multigenerational living spaces or steppingstones to long-term wealth creation.”

Whether current public officials will be responsive to such suggestions remains to be seen given that they are pulled in both directions when it comes to motivations to increase, maintain or cut the charges they add to loans.

Why officials could still consider raising g-fees

“There is significant risk that g-fees will be increased under Trump II for one of several possible reasons, thereby raising mortgage rates,” Former Freddie Mac CEO Don Layton said in a blog he wrote earlier this year.

Layton said Congress could look to offset planned tax cuts by adding to what’s currently a 0.10% tax on g-fees charged yearly and collected with them, but legislators also would have to consider its impact on the cost of housing President Trump has said he wants to lower. 

Olson calls for a repeal of this fee in his letter to legislators, saying that doing so would effectively be a “tax cut on homeownership.”

“There is an argument that has more of a negative impact on the homeownership than it has on helping bring down the cost of the tax bills,” he said in an interview.

Home affordability is something officials will have to consider both when it comes to Olson’s recommendation and the NAMB’s interest in removing price disincentives on second home and investor loans, which businesses and working families that are Trump constituents support.

However, Layton also notes that officials will consider that “there has long been a push for small-government conservatives and many Republican members of Congress to ‘shrink the footprint’ of the GSEs,” potentially leading to the end of GSE purchases of them altogether.

Why less onerous prices, terms may align with new product goals

While some constituencies want a smaller GSE footprint, others like Pulte have called for ideas for “new programs and products.” That presents an opportunity for the industry to argue for expanding homeownership rather than engaging in actions that could cause it to contract.

The NAMB’s suggestions for doing this could go beyond simply lowering rates through adjustments to pricing mechanisms, Nabors said.

In addition to suggesting the removal of LLPAs for second home and investor loans, Nabors’ letter calls for reducing a 12-month restriction on cash out refinancing Fannie Mae and Freddie Mac added in 2023 to a half year.

“A lot of people are using cashout refinances to consolidate their bills, which lowers their debt ratios, leading to a greater probability that they’re going to be able to make their monthly mortgage payments,” he said in an interview, explaining how this supports home affordability.

Nabors also would like to see the GSEs reverse an earlier lowering of the area median income limit to 80% from 100% for low-downpayment loans to make homeownership affordable to more borrowers.

Suggesting FHFA intervention in credit reporting costs

Another way to boost affordability would be for their regulator to look at how its requirements for credit reporting and scoring impact costs, Nabors said. 

The GSEs have found ways to use alternative methods to lower some appraisal expenses by allowing alternatives like waivers when considered practical given safety and soundness considerations, and Nabors thinks it’s worth exploring whether there’s an equivalent for credit.

Efforts that could reduce ancillary borrower loan costs that come into play at closing are another affordability concern with constituency conflicts.

Previous FHFA efforts to reduce such expenses “naturally led to strong opposition and lobbying from business interests,” Layton noted in his blog. “It is simply unclear how Trump II will balance its business orientation with its commitment to working families.”