Fannie, Freddie May Hike Fees in 2012

In overhauling Fannie Mae and Freddie Mac, the government may require more private mortgage insurance from borrowers and charge lenders higher fees to guarantee loans--moves that could increase borrowing costs, Edward DeMarco, acting director of the Federal Housing Finance Agency, said this week at a mortgage conference in Raleigh, N.C. Such steps are aimed at making the mortgage market more competitive and trim costs to the federal government by $28 billion over 10 years. The government-sponsored enterprises buy loans from lenders and package them into securities that are then sold to investors. The GSEs charge a “guarantee fee” when they buy mortgages, a fee likely to be raised in 2012. The increase could lead to a modest increase to mortgage borrowers. “Increasing the guarantee fees by 0.1 percentage point, as the White House proposed, would raise the monthly cost of a $220,000 mortgage by about $15,” The Wall Street Journal article notes. Fannie and Freddie may also require borrowers to hold more private mortgage insurance to lessen the risks on taxpayers. The federal government took over the GSEs in 2008. Any changes would be made “gradually” to avoid harming the already fragile housing market, DeMarco said. Source: “Fannie, Freddie to Raise Fees,” The Wall Street Journal (Sept. 19, 2011) and “Mortgage Finance Head: Shift Risk From Treasury,” Associated Press (Sept. 19. 2011)