Mortgage User Fees Anger Opponents

Special to The Times

Every now and then a “gut” or “pocketbook” issue comes along to demonstrate that even the White House will attempt to do something that really rankles some of its strongest organized supporters.

That’s what is happening now on Capitol Hill, where a Reagan-backed proposal to increase housing finance “user” fees has enraged groups that speak for housing/finance/realty interests. The Administration’s proposal to substantially raise the fees that home buyers pay to get VA and FHA mortgages has moved ahead a bit in the Senate to the wails of organized home builders, realtors, S&Ls; and mortgage bankers. To wit:

NAHB President John Koelemij told a House committee that the proposed increase in the user fee on home loans guaranteed by the Veterans Administration would “simply represent a new tax on veterans” that would damage their chances of becoming homeowners.

Raise Mortgage Rates


Much the same harsh sentiment emanated from the National Council of Savings Institutions whose Gary L. Jones told Congress that the higher fees would raise mortgage rates and impose a “tax on homeownership.” Jones added, getting to the crux of the issue: “When one looks at the revenue-raising effects of the user fees, it is apparent that these measures--as a revenue tool in the battle against the deficit--are almost negligible” because the fee increases would bring in only an estimated additional $50 million annually.

The National Assn. of Realtors editorialized that instead of raising fees, the government should reduce them and refund to FHA borrowers about $3.5 billion in the FHA Mutual Mortgage Insurance Fund. The realtor position went on: “The related fee increases proposed for other unsubsidized housing credit programs of the Veterans Administration, the Federal Home Loan Mortgage Corp. and Federal National Mortgage Assn. similarly are not justified.”

The key seems to be centered on what action Congress will take on a proposal to increase the VA fee from 1% to 3.8%. The fact that the move has had Republican support in the Senate upsets the opposing trade associations whose members more often than not gave strong support to President Reagan as well as Republican members of the Senate and House last November.

Of course, the Republican Administration position is simply that this is another move--and most of the changes to increase revenue or decrease spending are unpopular with some group or segment--to increase revenue and get closer to a balanced budget. These same housing-finance trade associations have been in the forefront of organized U.S. groups calling for a substantial trim in the big federal deficit.


Can’t Understand Changes

An example of how one “grass roots” home builder feels about this action came from Republican-oriented Edward R. Carr, whose firm built and sold 245 moderately expensive new houses last year in this area. He said that he cannot understand why the Reagan people are proposing changes in IRS regulations that would hit homeowners, and now are promulgating increases in VA and other mortgage use fees that would come down hard on veterans and young persons seeking to buy their first homes.

Instead, Carr suggested that the Administration cut down on all federal subsidies that aid any “segment of our society above the level of the truly needy.” Washington realtor Earl Farr supported Carr’s position that “this nation is not yet ready to abandon the hope of homeownership for its younger generation.”

Meantime, the Reagan Administration contends that the housing market has been exceptionally strong in recent years and thus could weather an increase in the cost of ownership this year. Farr added a proviso that increases in user fees for mortgage-takers might be absorbed without seriously damaging the total housing market only if mortgage rates--FHA, VA, conventional and ARM--were to decline at least to the 12% level this summer. Recently, the federally-set VA mortgage rate was increased from 12 1/2% to 13%, which now is the general level for most home mortgage financing in terms of basic costs to borrowers.

It will be interesting to see if the White House and Congress heed the pleas of their supporters in housing/finance or pursue David Stockman’s plans to increase revenue from the housing, real estate and mortgage businesses and “users” across the land.