President Obama's proposed fiscal year 2011 federal budget, unveiled Monday, includes the previously announced Financial Crisis Responsibility Fee, new limits on mortgage interest deductions for some taxpayers and $41.6 billion for the U.S. Department of Housing and Urban Development (HUD).
Conspicuous by its near-total absence from the budget was an outline regarding the government-controlled enterprises (GSEs), Fannie Mae and Freddie Mac. The lone reference to the companies stated, ‘The administration continues to monitor the situation of the GSEs closely and will continue to provide updates on considerations for longer-term reform of Fannie Mae and Freddie Mac as appropriate.’
HUD Secretary Shaun Donovan said the administration would release its plan for Fannie and Freddie "shortly," according to a Reuters report.
HUD's proposed funding of 48.5 billion would be offset by $6.9 billion in projected Federal Housing Administration (FHA) and Ginnie Mae receipts, bringing the net total to $41.6 billion – about 5% below fiscal year 2010.
The Mortgage Bankers Association (MBA) issued a statement Monday saying it supports the administration's efforts to improve risk management at the FHA, but opposes the proposal to reduce itemized deductions, including the deduction of mortgage interest, for taxpayers reporting income above $250,000 (joint) and $200,000 (single).
"This would have a negative impact on the housing market, particularly in high-cost states like California and New York, as it would increase the cost of mortgages for many potential homeowners," the trade group said. "MBA also opposes the proposal to tax carried interest at ordinary tax rates (as opposed to the capital gains rate, as it is taxed now), as it would discourage capital formation for lending."
The MBA believes the Financial Crisis Responsibility Fee, which would be levied on the debts of financial firms with more than $50 billion in consolidated asset, would reduce the availability and increase the costs of real estate loans to consumers and small businesses by discouraging large financial institutions from entering into new, private-label commercial mortgage-backed securities and residential mortgage backed securities transactions and significantly reducing the profitability of nonagency servicing.
Robert E. Story Jr., the MBA's chairman, also commented on the budget's lack of attention paid to Fannie Mae and Freddie Mac.
‘We rolled out our proposal in September and have been meeting with all stakeholders on Capitol Hill, within the administration and across the industry to share our perspectives," Story said. "Our proposal would provide a new foundation for supporting the core of the mortgage market. We look forward to continuing our discussions as the administration readies its suggestions.’