Fannie Mae, Freddie Mac to hike mortgage guarantee fees

Reuters News
Posted: Dec 09, 2013 1:22 PM
Fannie Mae, Freddie Mac to hike mortgage guarantee fees

WASHINGTON (Reuters) - Government-run Fannie Mae and Freddie Mac will raise the fees they charge mortgage lenders for guaranteeing new loans in March to encourage private firms to wade back into the housing finance market.

The so-called guarantee fees that the two taxpayer-owned companies charge lenders will increase by an average of 10 basis points, or one-tenth of one percent, their regulator said in a statement.

Increasing the fees will make loans backed by Fannie Mae and Freddie Mac more expensive, making it easier for private sources of capital to compete.

The government wants to reduce the burden on taxpayers of running the two companies and have private companies take their place in a market they largely abandoned during the financial crisis.

Edward DeMarco, acting director of the Federal Housing Finance Agency, which regulates the firms, said the fee increases are needed to shrink the footprint of the two companies.

"The price changes provide better protection of and return to taxpayers, who are providing the capital support that keeps these companies operating," he said. "These changes should encourage further return of private capital to the mortgage market."

Fannie Mae and Freddie Mac have received $187.5 billion in taxpayer aid since they were taken over by the government in 2008 as soured loans threatened their solvency. They have paid about $185.2 billion in dividends to the government for that support.

The fees they charge to guarantee principal and interest have almost doubled since 2009, a policy the regulator has used to dampen Fannie and Freddie's footprint in the mortgage market.

The FHFA said Fannie Mae and Freddie Mac will also alter pricing frameworks used to assess credit risk and, in most markets, eliminate an up-front 25 basis point "adverse market" fee they have been charging since 2008. They would still charge the fee in New York, Florida, New Jersey and Connecticut, where foreclosure costs remain elevated.

Taken together, all the steps would produce an average fee increase of about 11 basis points, it said.

(Reporting by Margaret Chadbourn; Editing by Leslie Adler and Andrew Hay)