Daily Briefing Weekend Edition

GSEs Rescind Fee Hike

By Brian Collins

WASHINGTON-Fannie Mae and Freddie Mac have cancelled a scheduled hike in their market risk delivery charges after their regulator - which oversees the two through a government conservatorship - urged them to reduce loan fees, a move that would make mortgages more affordable to consumers.

Earlier this fall the government-sponsored enterprises were slated to double their market risk delivery fees to 50 basis points - but that was before the Federal Housing Finance Agency took control of them on Sept. 7.

Fannie rolled back a 25 basis point increase in its "adverse market" delivery fee two days after it went into effect on Oct. 1. The GSE told its seller/servicers to waive additional charges for any borrower who has not yet closed on his/her loan.

Freddie also rescinded a 25 basis point hike in its "market condition" delivery fee that was slated to go into effect Nov. 7.

The 25 bp market risk delivery fee that was first levied in 2007 still remains in place, however. On a $100,000 loan, for example, the lender must pay a $250 delivery fee. Lenders usually try to pass these costs onto the borrower.

Over the past year, the two agencies have increased other fees to their seller/servicers and tightened underwriting standards, all in an effort to deal with rising delinquencies and losses. The fees have helped bolster their bottom lines. But with the credit markets spiraling out of control and homebuyers scared, Fannie and Freddie are under pressure from both their regulator and seller/servicers to review loan fees, including guarantee fees.

At a recent congressional hearing, Fannie's new chief executive Herb Allison said his staff is evaluating underwriting guidelines, pricing and costs in light of changing market conditions. "As we move forward, we will seek to balance our responsibility to provide the most market support possible with our obligation to protect the company and its many stakeholders, including taxpayers," Mr. Allison said.

National Association of Realtors managing director Jeff Lischer said rescinding the 25 bp delivery fee increase is a "good start," but more needs to be done to increase mortgage affordability.

The Realtors managing director for regulatory policy noted that a lot of the "risk layering" that led to the mortgage crisis is no longer tolerated in the market. But Fannie and Freddie have engaged in "safety layering" through higher fees and tighter underwriting standards. "The pendulum has swung too far," Mr. Lischer said.