The average single-family guarantee fee on 30-year fixed rate loans fell by 1 basis point to 59 basis points in 2017, according to a report on Fannie Mae's and Freddie Mac's single-family guarantee fees in 2017 by the Federal Housing Finance Agency (FHFA).
The report analyzes the government-sponsored enterprises' (GSEs') average guarantee fee and gives a breakdown by product type, risk class, and volume of their business. It also analyzes the costs of providing the guarantee and gives a comparison to the guarantee fee data of the prior years.
The upfront portion of the guarantee fee, which is based on credit risk attributes such as loan purpose, loan-to-value ratio (LTV), and credit score, fell 1 basis point to 15 basis points in 2017. The ongoing portion of the guarantee fee, which is based on the loan product type such as fixed-rate or ARM, and loan term, increased 1 basis point to 41 basis points, the report noted.
Higher interest rates in 2017 led to a smaller share of both rate-term refinances and the 15 -year loans acquired by the GSEs compared to the prior year. The report also indicated a slight increase in the share of loans with higher LTV and lower credit scores due to a larger share of purchase loans and a growing focus by Freddie and Fannie on pilot programs for first-time homebuyers and affordable housing.
Looking at the profitability of the loan types, the report indicated modest changes in 2017. While expected profitability improved slightly for 30-year fixed rate loans, it declined for a 15-year fixed rate and ARM loans.
Breaking down the numbers and comparing them to historical data, the report found that while guarantee fees had remained unchanged in 2016 and 17, they had increased between 2013 and 2014. Over the five year period that was covered under this report, the acquisition profile in 2017 reflected a slightly higher risk mix overall compared with 2016.
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