As 2018 drew to a close, the U.S. housing market looked very different than it did just a few years ago. Rapid increases in mortgage rates and several years of strong home price growth combined to weigh on consumers, keeping countless potential homebuyers across America on the sidelines.

The simple fact is that this country’s housing market is falling short of our booming economy. Unemployment rates remain at historic lows and job vacancies have reached historic highs, yet home sales are relatively stagnant. With that, and as the Federal Housing Finance Agency undergoes a change in leadership, policymakers in Washington have a golden opportunity to make reforms that will help the market reach its true potential. Fortunately, some of those reforms can be achieved simply and painlessly by modernizing outdated policies.


Over the past year, America’s 1.3 million Realtors have argued that Fannie Mae and Freddie Mac, which account for roughly half of all mortgage loans made in this country, must reduce so-called guarantee fees and loan-level pricing adjustments to align with new, lower U.S. corporate tax rates.

G-fees, as they are often referred, are used to offset credit losses, pay for operations and compensate investors. The FHFA has worked in recent years to ensure g-fees charged by Fannie Mae and Freddie Mac align more closely with private market pricing.

After the Tax Cuts and Jobs Act was signed into law at the end of 2017, private mortgage insurers began using cost savings from lower corporate tax rates to reduce fees imposed on consumers. However, although tax cuts have similarly helped reduce financial liabilities for Fannie and Freddie, the FHFA has yet to align with the private market by making corresponding cuts to its g-fee rates.

Based on changes that have occurred in the private mortgage insurance industry following 2017 tax cuts, the FHFA can and should make simple, market-based reforms to allow Fannie and Freddie to begin charging lower g-fees and loan level pricing adjustments.

Economist Mark Zandi has estimated that such reforms would lower rates by roughly 10 to 15 basis points, which would result in tangible decreases to monthly mortgage payments for the average American – making homeownership more affordable and more attainable.

In addition, the FHFA has the alternative option of using this extra revenue to seed a fund that would take credit, accounting and other losses ahead of taxpayers. This fund, dubbed the Mortgage Market Liquidity Fund, would reside outside of the GSEs and be overseen by the FHFA. It would help to alleviate the unnecessary draws on taxpayers’ line of credit and would keep homeowners’ fees in the housing arena.

Fannie Mae and Freddie Mac continue their critical role of providing liquidity to the housing market through the buying, securitizing and guaranteeing of single-family mortgages across America. However, they can and must do more.

By bringing guarantee fees and loan level pricing adjustments in line with new, lower corporate tax rates, the FHFA will ensure the agency maintains its mission and continues to effectively serve taxpayers. Most importantly, though, these simple reforms will help make the dream of homeownership a reality for countless new families and prospective home buyers across America.

John Smaby is the 2019 President of the National Association of Realtors®. A second-generation Realtor®, John has been in the industry for 40 years and is currently a broker at Edina Realty in Edina, Minnesota.