Trying to thread a needle, the Federal Housing Finance Agency on Friday left unchanged broad overall fee charged on most Americans taking out a mortgage but eased a controversial charge imposed in the heat of the U.S. financial crisis on riskier borrowers.
The FHFA is the regulator of Fannie Mae and Freddie Mac, the two quasi-governmental mortgage-finance giants that buy mortgages originated by banks and package them into bonds sold to investors. Fannie and Freddie have been in government conservatorship since the summer of 2008, and many of the fees in question _ loan guarantee fees, dubbed G-fees_ were raised to help protect taxpayers from loss.
Lenders fear that any substantial hike in fees would hurt an already sluggish lending environment, and late Friday the FHFA announced changes that keep the broad average fee in place, but remove an adverse-market fee imposed on weaker borrowers with lower credit scores. The fee of a quarter of a percentage point was imposed in 2008.
At the same time, fees will go up slightly for loans involving mortgages on investment property, cash-out refinanced mortgages, and conforming jumbo loans that are larger than normal but still qualify for purchase by Fannie or Freddie. The changes take effect Sept. 1.
“This is the culmination of months of review and analysis and reflects input received from a wide range of stakeholders,” FHFA Director Melvin L. Watt said in a statement. “Our goal is to assure taxpayers, homeowners and industry that we are striving for an appropriate balance between safety and soundness and liquidity in the housing finance market.”
The changed fee structure implies that weaker borrowers pose less of a threat for taxpayer losses than do investment properties and larger loans.
“The net effect of the new G-fee policy is there will be no change in the overall G-fee level,” insisted an official involved in the decision making, demanding anonymity in exchange for briefing reporters.
Last June, the FHFA began seeking input on potential changes to the G-fees, and got a lot of pushback against lowering or raising the broader average fee level charged by Fannie and Freddie when taking loans originated by banks and placed with either of the two government-controlled entities.
In December 2013, the FHFA said it would eliminate the fee on riskier borrowers except for those in Connecticut, Florida, New Jersey and New York. These states had higher rates of foreclosure. Friday’s announcement removes the fee on borrowers in those states.
Watt, a former North Carolina Democratic Congressman, met with McClatchy and other news organizations in early February and hinted at a springtime decision on fee increases. Watt suspended an increase in guarantee fees that was planned by his predecessor, who had argued they were necessary to offset risks.
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