Last week, we released the first Redfin Demand Index, which offers an early indicator of housing-market performance. It’s a new take on activity that could help buyers and sellers make decisions. Here in Washington, the housing news was all about building highways. What do traffic cones have to do with your home? Plenty. Oh, and we found the world’s priciest parking lot. Read on.
What’s a g-fee?
So glad you asked. For some in Congress, g-fees are free money that can be tapped to build, say, roads and bridges. For the rest of us, they’re the payments homeowners make to keep the U.S. mortgage system functioning.
This week, Congress will decide whether to use g-fees to help pay for an expiring highway bill. Let’s hope they don’t.
Here’s why. Most homeowners, through their mortgages, pay a fee to Fannie Mae and Freddie Mac, which use the money to insure against loan defaults and foreclosures. Last year, the average mortgage borrower paid 58 basis points to get a Fannie or Freddie loan.
That’s a 250 percent increase since 2009. G-fees have gone up because we learned during the financial collapse that Fannie and Freddie, which are backed by us taxpayers, weren’t charging enough to guarantee our loans. That’s one reason we had to bail them out.
These days, Fannie and Freddie are making good money, which is why some senators want to take nearly $2 billion in g-fees to build roads. We’ll see how the idea plays out this week, when Congress ponders how to pay for highway funding that dries up Friday.
Sounds like a back-door tax on homeowners, right? It’s not quite that simple, but yes. And if lawmakers start making a habit of using g-fees to balance the federal budget, there’s another, bigger problem. Five years after the Dodd-Frank Act rewrote the rules of Wall Street, our mortgage system remains almost wholly dependent on taxpayers to function. Senators Mike Crapo, a Republican, and Mark Warner, a Democrat, call the Senate highway plan a “budgetary gimmick” that will make our still-broken mortgage system even harder to fix.
If there’s another serious economic downturn, we’re all still on the hook for those Fannie and Freddie loans. This week’s g-fee tussle probably will fade away, but the political temptation to use our mortgages as cash cows probably won’t.
About those mortgages
Rates have ticked up this year, which is one reason we think the housing market is set for a late-summer slowdown. The inaugural Redfin Demand Index, released last Thursday, showed a steep decline in homebuyer demand from May to June. We expect home prices to rise about 4.3 percent this month and just 2.2 percent in August.
Think retirees have high medical costs? Take a look at what they pay for shelter. Urban Institute has a new report on elderly housing costs.
Architects had less residential work for the fifth month in a row. Should we blame first-time buyers?
We’re getting better at filling out mortgage applications, according to First American.
$70,000 a day?!? Bloomberg reports on the world’s priciest parking lot.