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New boss of Fannie, Freddie freezes fees to assess impact of planned increase

Thu., Jan. 9, 2014

WASHINGTON – The new regulator for Fannie Mae and Freddie Mac said Wednesday he was delaying planned fee increases by the seized mortgage finance giants because he wanted to assess the impact on the housing market.

Melvin L. Watt, who was sworn in as director of the Federal Housing Finance Agency on Monday, quickly showed there would be a change in the direction of government oversight of Fannie and Freddie.

He said he intended “to conduct a thorough evaluation” of an increase in fees the firms charge lenders to guarantee mortgages. Those increases, which would make mortgages more expensive, were set to take effect in March and April.

The FHFA, under former acting director Edward J. DeMarco, announced in December that it had directed Fannie and Freddie to increase their base guarantee fee, or g-fee, by 0.1 percentage points and make changes to other fees.

The agency estimated that the fees for a 30-year fixed-rate mortgage would increase by 0.14 percentage points as part of an effort to reduce Fannie’s and Freddie’s over-sized presence in the housing market.

The new fees would better reflect the risk of guaranteeing mortgages and allow private firms to better compete to guarantee mortgages, DeMarco said.

Fannie and Freddie guarantee or purchase more than six in 10 new mortgages.

The fees usually are passed on by lenders to borrowers, increasing the cost of mortgages. The combination of higher-priced mortgages, along with other changes such as new federal standards for “qualified” mortgages, could slow the housing market recovery, analysts said.

“The implications for mortgage credit availability and how these changes interact with the new qualified mortgage standards could be significant,” Watt said. “I want to fully understand these implications before deciding whether to move forward with any adjustments to g-fee pricing.”


 

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