Fannie Mae and Freddie Mac’s guarantee
fees (g-fees) on single-family mortgages are about to go up by an average of 10
basis points. The increase was announced
by the Federal Housing Finance Agency (FHFA) this morning and will take effect for
loans sold for cash on November 1 and for loans exchanged for mortgage-backed
securities (MBS) one month later.
FHFA said the change to the g-fee
pricing is intended to encourage greater participation in the mortgage market
by private firms, a goal set in the agency’s Strategic Plan for Enterprise Conservatorships. The two government-sponsored enterprises
(GSEs) said they will work directly with lenders to implement the changes.
Acting FHFA Director Edward J. DeMarco
said “These changes will move Fannie Mae and Freddie Mac pricing closer to the
level one might expect to see if mortgage credit risk was borne solely by private
FHFA, conservator of the GSEs said the
hike will increase uniformity of the g-fees charged to lenders to deliver
large volumes of loans and those who deliver smaller volumes. It will also reduce cross-subsidies between
higher-risk and lower-risk mortgages by increasing g-fees on loans with
maturities longer than 15 learns more than on shorter term notes.
FHFA also released its fourth annual
report on single-family guarantee fees.
The report, covering the years 2010 and 2011, found that the average
g-fee charged by the GSEs increased from 26 basis points in 2010 to 28 basis
points in 2011. The report also found
that mortgages with higher credit risk were subsidized, on average, by loans
that posed a lower risk and that the majority of loans acquired by Fannie and
Freddie came from a small group of large lenders. FHFA said the new pricing structure is
designed to address both issues.