September 7th, 2012 1:43 PM by Dana Bain
The Federal Housing Finance Agency (FHFA) announced on Friday that it has ordered the two government-controlled mortgage houses to raise fees in an effort to bring more private lenders into the mix.
Fannie Mae and Freddie Mac will raise the guarantee fees, or g-fees, they charge lenders to guarantee new loans on single-family homes by 10 basis points or .10 percent. That would cost a home buyer purchasing a 30-year mortgage of $200,000 an extra $4,000.
Fannie and Freddie were taken over by the government in 2008 after billions of dollars in mortgage-related losses helped crash our economy.
The Obama administration proposed the fee increase in order to reduce the government’s role in the still-struggling housing market.
“These changes will move Fannie Mae and Freddie Mac pricing closer to the level one might expect to see if mortgage credit risk was borne solely by private capital,” said Edward J. DeMarco, Acting Director of FHFA.
The new fee will go into effect on November 1 for loans sold for cash and December 1 for loans exchanged for mortgage-backed securities.
The increase could lead to higher interest rates, which were down for the week leading up to Labor Day:
*30-year fixed-rate mortgage (FRM): Averaged 3.59 percent for the week ending August 30, down from last week’s 3.66 percent.
*15-year FRM: Averaged 2.86 percent, down from last week’s 2.89 percent.
*5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM): Averaged 2.78 percent, down from last week’s 2.96 percent.
*1-year Treasury-indexed ARM: Averaged 2.63 percent, down from last week’s 2.66 percent.
“Treasury bond yields fell, allowing mortgage rates to follow, after the release of the July 31st and August 1st minutes of the Federal Reserve’s monetary policy committee,” said Frank Nothaft, vice president and chief economist at Freddie Mac. “Committee members agreed that economic activity had decelerated more in recent months than they had anticipated at their last meeting in June. Some members even saw room for additional stimulus fairly soon if needed.
“Nonetheless, the housing market continued to show improvement over the past few months. New home sales rose 3.6 percent in July matching May’s pace as the strongest month since April 2010. Similarly, pending existing home sales also rose in July to its highest rate since April 2010. And, the S&P/Case-Shiller® National Home Price Index rose 1.2 percent between the second quarter of 2011 and 2012, reflecting the first annual increase since the second quarter of 2010.”