03 Feb New FHFA Director Halts Guarantee Fee Hikes
Potential mortgage rate hikes has been in the news for months, but thanks to new Federal Housing Finance Agency (FHFA) Director Mel Watt, guarantee fee (g-fee) hikes will remain on hold for now. Back in December when Watt’s appointment was announced, the FHFA had said pricing plans for Freddie Mac and Fannie Mae loans would be redefined, and all mortgages would see a 10-basis point increase that was due to take effect in March or April of this year.
However, just as news broke about his appointment as FHFA director, Watt said he would postpone the guarantee fee hikes pending further investigation. He said: “The implications for mortgage credit availability and how these changes interact with the new qualified mortgage standards could be significant. I want to fully understand these implications before deciding whether to move forward with any adjustments to g-fee pricing.”
Watt, who is a former Democratic congressman from North Carolina, was sworn in as director on Monday, January 7, 2014. He is currently in the process of reviewing the FHFA’s plan and its potential impact on the GSE, not to mention how the potential g-fee hikes could impact interested home buyers.
The housing recovery has been largely based on buyers’ ability to secure an affordable mortgage, particularly in the first half of 2013 when mortgage rates hovered around historically low levels. However, a change in fee structure could have a negative impact on the recovery, especially in states like Connecticut, Florida, New Jersey and New York that are considered “adverse markets” by the FHFA. Here, foreclosure costs are already much higher than in other parts of the U.S., and new fees could make home buying even more difficult in these places.
The FHFA said their intent with the guarantee fees was to decrease Fannie Mae and Freddie Mac’s presence in the housing industry. Right now, they guarantee or purchase more than six in 10 mortgages, and both Republicans and Democrats would like to see that diminished. Watt says he will take time to review the FHFA’s plan, adding: “It was important to announce my intentions because of the prospect that some lenders could start to price the announced changes into the market well before the effective dates.”