Banks with $1 billion or more in assets would see dividend payments received for putting their money into the Federal Reserve’s bank, reduced to 1.5 percent from 6 percent as part of the Senate plan to pay for three years of road work in its six-year highway bill.
Bank groups are opposing the plan and have been joined by mortgage lenders.
Another part of the same funding plan would extend a temporary 10-year increase in fees paid to guarantee loans, mostly for middle and lower income homebuyers, to 14 years. All of this comes as lawmakers face and end-of-week deadline to keep the Highway Trust Fund operating beyond July.
The Missouri Bankers Association and the Missouri Mortgage Bankers Association are part of a national effort by the financial services industry, home builders and others to block more than a third of the funding for the Senate plan.
About 25 of the state’s largest banks would feel the pinch from reduced dividend payments according to Craig Overfelt, senior vice president for government affairs with the Missouri Bankers Association. “Anytime you take a revenue source away from the banks, it provides less funding for them to help their customers obtain any types of loans that they get from the banks.”
The Senate’s plan would provide about $50 billion for each of the first three years of the six-year bill, roughly one-third of that by shifting money away from the banks to pay for road projects. “We’re opposed to putting that burden on the banks to pay for the highway system,” Overfelt continued. “It should be more widespread throughout the general population.”
Since 1993, lawmakers have refused to increase the federal motor fuel tax, seeing tax increases in general as politically unpopular. That reluctance, combined with greater fuel efficiency, more hybrids and all electric vehicles traveling the nation’s aging roadways, means federal dollars to maintain, repair and rebuild those highways and bridges falls short by an estimated $15 billion, according to U.S. Transportation Secretary Anthony Foxx.
Mortgage Bankers mobilizing
In Washington, the Mortgage Bankers Association is leading a national “call to action” on the part of its members according to Bill Killmer, the group’s senior vice president for legislative and political affairs. “I know we’ve gotten well over a thousand responses from across the country and we’ve actually had folks weigh-in with every Senate office.” He says members are also being encouraged to call and email their representatives in the House in anticipation of both chambers working out differences between their two bills.
Two weeks ago, the House passed its own, five-month extension of the Highway Trust Fund. Senate Majority Leader Mitch McConnell, R-Ky., has said he wants to pass a longer-term plan to push the issue beyond next year’s presidential election. As of Monday though, McConnell’s plan appears to be unlikely even if senators approve the chamber’s bill this week. Monday morning, House Majority Leader, Kevin McCarthy, R-Calif., told reporters he had no intention of calling the Senate bill for consideration before the House’s scheduled departure on Thursday, for its month-long break from Washington.
McCarthy says the Senate should pass the House bill this week and send it to the president.
G-Fees and bad policy
G-fees, as they are known in the mortgage industry, are paid to guarantee loans through Fannie May and Freddie Mac, to protect against mortgage defaults. Killmer says that in 2011 Congress and the White House temporarily increased those fees for 10 years to pay for the Obama administration’s payroll tax cut. That increase is scheduled to expire in 2021. The Senate wants extend that temporary increase for an additional four years, to 2025, to generate about $2 billion for the Highway Trust Fund.
Killmer says this isn’t the first time lawmakers have looked at using the fees, which he describes as “critical risk management tools,” to pay for government spending unrelated to the housing industry. Beyond the payroll tax reduction, Congress also considered using the fees to pay for the Gulf Coast restoration after the BP oil spill and an immigration proposal. He says “this attempt to pay for a highway reauthorization is just really bad policy.”
Killmer says that, while it’s not up to the Mortgage Bankers Association to tell Congress how to pay for highways, such as increasing the motor fuel tax, he thinks it would make sense to use a “funding mechanism that does come from related policy. We’ve got no argument if someone wants to get into a policy debate about a housing program if they want to talk about the revenue source coming from housing,” Killmer said. “So, we think that really ought to be the construct for the highway debate as well.”
He also said that his group is under “no illusion that this won’t come back in some form or fashion … for some other proposal,” especially since Congress is “starved to come up with revenue to pay for programs.” He said Mortgage Bankers across the country are “going to stay vigilant and continue to mobilize over the course of the rest of the year.”