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Guarantee Fee Tax
- Instead of sun-setting the current 10 basis point fee in 2021 as envisioned by Congress, budget would double the existing 10 basis point fee on homebuyers to 20 basis points for FY 2021 and extend it through FY 2030. This fee was adopted by Congress in 2011 to pay for a temporary tax cut during the Great Recession. The White House justification for the higher fee is to make private-label mortgage backed securities more competitive with those of Fannie and Freddie.
Capital Magnet and Housing Trust Funds Eliminated
- The budget proposes to eliminate the contributions Fannie Mae and Freddie Mac make to the capital magnet and housing trust funds. Congress established these trust funds, which Fannie and Freddie finance, to support community development and the construction of affordable housing. However, the Federal Housing Finance Agency (FHFA) cut off funding during the financial crisis. Later, FHFA Director Mel Watt reversed that move. Now the White House wants the funding source eliminated in lieu of cost reduction through reduced or remove local regulation.
Financial Oversight Funding
- The White House proposes that Congress establish funding levels for the Office of Financial Research (OFR) and the Financial Stability Oversight Council (FSOC) through annual appropriations. The OFR and FSOC were created by the Dodd-Frank Act to enable financial and banking regulators to monitor risks that spanned regulators or which did not have a focal regulator.
Student Lending
- The White House’s budget includes a line-item for “risk sharing” on student loans, but provides no detail on how this would work. The budget also calls for consolidating the income-based loan repayment programs into a single program. Students would pay 12.5% of their income for 15 years. After that, undergraduate loans would be forgiven. For graduate loans, the repayment period is 30 years. To pay for these programs, the White House proposes to eliminate subsidized student loan programs as well as the public service loan forgiveness program.
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