Tag Archives: Guarantee Fees

The Mortgage Bankers Association (MBA) shared a proposal to bring private capital back into the mortgage market while decreasing costs for taxpayers and borrowers. In a recent paper, the MBA explained the up-front risking sharing concept, which calls for the GSEs to offer risk-sharing at the front end of transactions. The proposal also suggested Fannie Mae and Freddie Mac should accept loans with ""deeper levels of credit enhancement"" in exchange for reduced guarantee fees and other loan level charges.

The goal of attracting private capital into the mortgage market is at the center of discussions throughout the industry and the government. Thus far, ""efforts by the Federal Housing Finance Administration and other federal agencies to provide incentives for the creation of a vibrant private mortgage securitization market have been largely unsuccessful,"" according to Fitch Ratings. However, the ratings agency does see some promise in a couple of FHFA's goals.

Keefe, Bruyette & Woods (KBW) a boutique investment bank and broker-dealer, recently released its predictions for the mortgage market for the year 2013, entitled Watching Grass Grow: Mortgage Reform in 2013. As the title implies, KBW does not expect major changes in the New Year. However the investment bank does expect some ""modest changes in the mortgage landscape driven by the Federal Housing Finance Agency (FHFA).""

A controversial bill that would extend an increase on guarantee fees (g-fees) on mortgages backed by the GSEs or the Federal Housing Administration (FHA) has passed in the House of Representatives. The bill, H.R. 6429 proposes reforms for visas offered to immigrants who possess advanced training in science, technology, engineering, or mathematics.

David Stevens, president and CEO of the Mortgage Bankers Associations, is voicing concerns about legislation (H.R. 6429) that would raise guarantee fees charged on single-family mortgages by Fannie Mae and Freddie Mac in order to pay for immigration reforms. Stevens issued a public statement stressing that the GSEs' guarantee fees are supposed to be used to offset risks associated with their mortgage purchases. He says dipping into the housing piggybank to pay for unrelated policy items on the backs of America's homebuyers sends the wrong message.

The Federal Housing Finance Agency (FHFA) plans to change the guarantee fees (g-fees) the GSEs charge on single-family mortgages. Starting in 2013, g-fees will be higher in some states than others, according to a notice sent to the Federal Register. Currently, g-fees are the same throughout the country. However, the FHFA has noticed ""a wide variation among states in the costs that the Enterprises incur from mortgage defaults,"" according to its notice to the Federal Register.

Before the end of this year, Fannie Mae and Freddie Mac will raise guarantee fees (g-fees) on single-family mortgages by an average of 10 basis points. On Friday, FHFA announced it has directed Fannie Mae and Freddie Mac to increase g-fees as a step toward encouraging more mortgage market participation from private firms. The increase are scheduled to take effect on December 1 for loans exchanged for mortgage-backed securities and for loans sold for cash, the increases are scheduled for November 1, 2012.

Congress has already approved of raising Fannie Mae and Freddie Mac guarantee fees to support non-housing related initiatives once before. Now, lawmakers are contemplating the use of GSE guarantee fees to fund student loan relief. In response to this, officials from Nationwide Title Clearing sent a release asking Congress not to raid the real estate piggy bank, stating an increase will lead to higher interest rates.

The Community Mortgage Lenders of America (CMLA) released a white paper outlining its policy suggestions for the future of Fannie Mae and Freddie Mac. Shrinking the GSEs role in the secondary market to 30-35 percent and preventing them from securitizing or investing into risky mortgages were among the ideas the trade group endorses. Still, the CMLA said it wants to see the GSEs remain intact due to uncertainty in the markets and to ensure further destabilization does not occur.