In 2011, when Congress and the Obama Administration wanted to give taxpayers a temporary 2.0 percentage point reduction in payroll (FICA and Medicare) taxes, it funded the cut in part by increasing the g-fees charged by Freddie Mac and Fannie Mae (the GSEs) for their mortgage guarantees by 0.1 percentage point.  The payroll tax break is long over, but the g-fee increase doesn't expire until 2021. The proposed budget released by the Trump Administration today wants to extend and add to it.

Little of the proposed $4.4 trillion budget is expected to survive Congress, which already adopted a two-year budget plan last week under threat of the second shutdown so far in 2018. However, the proposal to extend the earlier increase through 2023 and add another 0.1 percent to it is projected to bring in $25.7 billion over the next 10 years.

The fee would be in addition to the healthy share of the GSE's revenues which Treasury collects in the form of dividends each quarter.  While Freddie and Fannie are both expected to require the first draws on their lines of credit with Treasury since 2012, the proposed budget envisions collecting $185 billion from them over the next decade.  The draw, an anticipated $5.1 billion, will be necessary because the new tax law changes how some of their assets are valued, resulting in a one-time tax hit.

The budget, if passed, would also relieve the GSEs of their obligation to contribute to the trust funds set up to provide money for affordable housing.

Bloomberg says the budget plan provides a little insight into how the administration views the future of the two GSEs which have operated under government conservatorship since 2008.  After an initial flurry of speculation that Treasury Secretary Steven Mnuchin might favor releasing Freddie and Fannie from conservatorship, little has been said about them or the housing finance system in general.  If such plans are still on the table, Bloomberg says, they are not reflected in the budget. 

The budget document does say however that raising the g-fees "would help level the playing field for private lenders."  Except for some jumbo loans, private money has been absent from the mortgage market since the housing crisis.

"The notion that higher g-fees stimulate private capital is a bit of a stretch," says Matthew Graham of Mortgage News Daily.  "If the first round of major g-fee hikes didn't do the trick, there's no reason to believe the next 0.1 percent is anything other than another stealth tax on homeowners.  After all is said and done, a 0.1 g-fee increase amounts to a 0.1% increase in conforming mortgage rates."