Statement of Administration Policy: H.R. 1056 - Limit on Government National Mortgage Association (GNMA) Fees

Revision
(House)
(Gonzalez (D) Texas and Frank (D) Massachusetts)

The administration opposes H.R. 1056 because it would:

— nullify GNMA's announced increase in the amount of the service fee (50 basis points or .50 percent) that GNMA securities issuers must pay to the government from six basis points (.06 percent) to ten basis points (.10 percent), effective March 1, 1987;

— continue to allow mortgage bankers and other GNMA issuers to receive a larger servicing fee (44 basis points) than they make servicing non-government mortgage backed securities (about 38 basis points);

— increase the fiscal year 1988 budget deficit by about $52 million and add $596 million to the deficit between now and the end of 1992; and

— place unnecessary and inappropriate restrictions on GNMA's administrative flexibility.

The planned increase in the fee is intended to shore up GNMA's reserves. The effect would be to redistribute the current 50 basis points GNMA service charge between the government and securities issuers. This would be the first fee increase for the government since the program began in 1970.

If H.R. 1056 were to reach the President's desk, the President's senior advisers would recommend a veto.