The guarantee fees, or g-fees, for mortgages guaranteed by Fannie and Freddie will increase an average of 11 basis points, according to the FHFA. The fees, which are charged to cover potential losses by Fannie and Freddie, are being raised as part of an ongoing effort to lure private capital back into the mortgage market. The higher fees are set to go into effect in March and April.
“The new pricing continues the gradual progression towards more market-based prices, closer to the pricing one might expect to see if mortgage credit risk was borne solely by private capital,” FHFA Acting Director Edward J. DeMarco said. “The price changes provide better protection of and return to taxpayers, who are providing the capital support that keeps these companies operating. These changes should encourage further return of private capital to the mortgage market.”
The problem is that those fees hike the prices of Fannie and Freddie loans – and that expense gets passed on from the wholesaler to the originator and ultimately to the consumer, said Marc Savitt, president of the National Association of Independent Housing Professionals.
“It’s all passed on to the consumer, and it’s going to make mortgages more expensive,” Savitt said Tuesday. “That’s the only way to describe it. … Every time they raise the g-fees, in reality it’s a tax on home ownership, which they don’t need to be doing right now.”
Officially, g-fee increases are meant “to reduce taxpayers’ credit exposure by accelerating actions to draw private capital into the market to stand ahead of the Fannie Mae and Freddie Mac guarantee,” according to the FHFA. In practice, however, the fees have been raised in the past to provide a revenue stream to offset other government expenditures. In 2011, Congress paid for a short-term extension of a payroll tax break by hiking the guarantee fees
0.1 percentage points.
“The whole thing always trickles down to the consumer,” Savitt said. “Any time they have any more compliance costs, g-fee increases, anything – it ends up on the consumer. And it’s paramount that we keep home ownership affordable.”
Fannie Mae and Freddie Mac loan-guarantee fees will be going up again, and that means more headaches for originators and consumers, according to an industry group head.