Fannie Mae and Freddie Mac loan guarantee fees are going up again, and the cost is simply passed along to borrowers. Rather than reflecting the actual cost of doing business for Fannie/Freddie – this change is a penalty and raises the cost of a Fannie/Freddie loan under a “plan” to encourage private capital to the mortgage marketplace. The guarantee fees, or G-fees, for conventional mortgages guaranteed by Fannie and Freddie will increase an average of 11 basis points, according to the FHFA. The fees, which in the past were 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. In January 2012 and again in September 2012 Congress slipped a 10bps increase in the G-Fees under the same guise. The funds from the January increase go to the general fund and not to Fannie or Freddie at all. It was done to offset a payroll tax break, putting the extra costs on home borrowers and allowed Congress to avoid having to repeal the politically popular payroll tax cut. A bit slight of hand, don’t you think? Here is the quote from FHFA … “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 when increased loan fees hike the prices of Fannie and Freddie loans, that expense gets passed on to the consumer and make mortgages more costly. The opinions expressed in this post are mine … if you could use assistance navigating your options for residential financing, please give me a call.
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