FHFA Announces Another 10 Basis Point Increase In G-Fees

Fannie Mae and Freddie Mac’s guaranteernfees (g-fees) on single-family mortgages are about to go up by an average of 10rnbasis points.  The increase was announcedrnby the Federal Housing Finance Agency (FHFA) this morning and will take effect forrnloans sold for cash on November 1 and for loans exchanged for mortgage-backedrnsecurities (MBS) one month later.   </p

FHFA said the change to the g-feernpricing is intended to encourage greater participation in the mortgage marketrnby private firms, a goal set in the agency’s Strategic Plan for Enterprise Conservatorships.  The two government-sponsored enterprisesrn(GSEs) said they will work directly with lenders to implement the changes.</p

Acting FHFA Director Edward J. DeMarcornsaid “These changes will move Fannie Mae and Freddie Mac pricing closer to thernlevel one might expect to see if mortgage credit risk was borne solely by privaterncapital.”</p

FHFA, conservator of the GSEs said thernhike will increase uniformity of the g-fees charged to lenders to deliverrnlarge volumes of loans and those who deliver smaller volumes.  It will also reduce cross-subsidies betweenrnhigher-risk and lower-risk mortgages by increasing g-fees on loans withrnmaturities longer than 15 learns more than on shorter term notes.</p

FHFA also released its fourth annualrnreport on single-family guarantee fees. rnThe report, covering the years 2010 and 2011, found that the averagerng-fee charged by the GSEs increased from 26 basis points in 2010 to 28 basisrnpoints in 2011.  The report also foundrnthat mortgages with higher credit risk were subsidized, on average, by loansrnthat posed a lower risk and that the majority of loans acquired by Fannie andrnFreddie came from a small group of large lenders.  FHFA said the new pricing structure isrndesigned to address both issues.

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