An increase to the mortgage guarantee fees (g-fees) associated with loans from Fannie Mae and Freddie Mac is delayed for now thanks to Federal Housing Finance Agency (FHFA) Melvin L. Watt, who was sworn in Jan. 6.
Fannie Mae and Freddie Mac charge g-fees to loan servicers on most conventional loans. According to Greg Kingsbury, a Loan Consultant with Caliber Home Loans, the move to increase the rate comes from two motivations: to encourage more private sector activity in the mortgage industry and to help off-set the risk associated with some of the loan the mortgage entities are backing.
Watt said he would need time to review the proposal which was first announced in December and set to go into effect in March and April.
“The implications for mortgage credit availability and how these changes might interact with the new qualified mortgage standards could be significant,” said Watt in a statement. “I want to fully understand these implications before deciding whether to move forward with any adjustments to g-fee pricing.”
The increase, if and when it goes into effect, will be passed on to borrowers, explains Kingsbury. He anticipates the increased rates having a more noticeable impact on borrowers with lower down payments, like those at the five or ten percent level.
Kingsbury expects lenders will increase their rates shortly after FHFA announces a new timeline for the fee changes.
Watt said after completing the evaluation his agency will provide no less than 120 days’ notice before implementing any changes.
