Will More G-Fee Hikes Bring Private Capital into Market?

The GSE regulator hiked Fannie Mae and Freddie Mac guarantee fees twice in 2012 and he hinted that more hikes may be coming.

Federal Housing Finance Agency acting director Edward DeMarco told business economists on Monday that the average g-fee is around 50 basis points, nearly double what it was before the two secondary market agencies were placed in conservatorship back in 2008.

“The idea is that at some point the increases in guarantee fees will encourage private capital back into the market,” DeMarco said.

But the Mortgage Bankers Association is concerned the g-fee hikes are just pushing more business to the Federal Housing Administration, which is trying to shrink its market share, too.

Raising Fannie and Freddie g-fees is like “squeezing a balloon,” said MBA president and chief executive David Stevens.

“You squeeze one side of the balloon and the loans go to FHA. You squeeze FHA and the loans go back to the GSEs,” he told NMN. “We are not pushing loans back to the private sector.”

What is needed, the MBA president said, is “more coordination amongst all the regulators.”

Speaking at a National Association for Business Economics conference, DeMarco acknowledged that Fannie and Freddie g-fee hikes have yet to induce private capital to re-enter the mortgage market.

“We are not there yet, but in conversations with market participants, I think we are getting closer,” the GSE regulator said.