Some mortgage industry members are applauding Congressional efforts to raise the guarantee fees that Fannie Mae and Freddie Mac charge lenders, saying the increases could help bring private investors back into the mortgage market.
As reported by National Mortgage News over the past week, House Republicans and Senate Democrats have proposed legislation that would raise the so-called "g-fees" that banks pay government-sponsored enterprises to cover the risk of defaulting mortgages. The resulting revenue would help the Treasury Department fund an extension of the payroll tax holiday.
The proposals come as Fannie and Freddie have already started raising the guarantee fees that they charge the largest banks.
Private investors have withdrawn from the market, in part, because they cannot compete with the government's rock-bottom prices for mortgage-default guarantees. But if the government raises guarantee fees by a high enough amount, the increases would make the market rates more attractive and entice private investors to buy loans from lenders themselves.
That would reignite the market for private securitizations, helping to wean the mortgage-bond market off of government support and diminishing the roles of government wards Fannie and Freddie.
"Private secondary market investors are starving for yield, and raising the g-fees to a level where they can compete would allow private capital to come back into the market," says Terry Wakefield, the chief executive of Wakefield Co., a Mequon, Wis., mortgage consulting firm.
The volume discounts Fannie and Freddie gave to large banks have long been a point of contention in the mortgage industry, particularly for community banks and smaller lenders that pay higher fees to cover the risk.
During the housing boom before the financial crisis, the GSEs competed against each other for business and used volume discounts as incentives for the largest lenders to sell them mortgages.
Community bankers have long protested that arrangement. Fannie and Freddie should have been charging lenders like Countrywide Financial Corp. a premium to cover the higher risk of those mortgages, says Ron Haynie, president and chief executive of ICBA Mortgage, a subsidiary of the Independent Community Bankers of America.
He adds that community banks, which originated fewer but better-quality loans, ended up paying higher guarantee fees — requiring them to charge borrowers more and making it tougher for them to compete for business.
"Negotiating fees based on volume is absolutely ridiculous," says Haynie. "The discounts helped drive consolidation to the larger banks."
Ed DeMarco, acting head of the GSEs' primary regulator, has signaled for months that the volume discounts that Fannie and Freddie gave Bank of America Corp., Wells Fargo & Co. and other large lenders would be eliminated. DeMarco has argued that the federal subsidy to large banks is unnecessary and could potentially save taxpayers money, since the GSEs are operating under conservatorship and no longer compete against each other.
Haynie, whose organization represents smaller banks, says that ending the discounts to the big banks will "better reflect risk" and allow community banks to remain competitive.
Some mortgage industry members are applauding Congressional efforts to raise the guarantee fees that Fannie Mae and Freddie Mac charge lenders, saying the increases could help bring private investors back into the mortgage market.
As reported by National Mortgage News over the past week, House Republicans and Senate Democrats have proposed legislation that would raise the so-called "g-fees" that banks pay government-sponsored enterprises to cover the risk of defaulting mortgages. The resulting revenue would help the Treasury Department fund an extension of the payroll tax holiday.
The proposals come as Fannie and Freddie have already started raising the guarantee fees that they charge the largest banks.
Private investors have withdrawn from the market, in part, because they cannot compete with the government's rock-bottom prices for mortgage-default guarantees. But if the government raises guarantee fees by a high enough amount, the increases would make the market rates more attractive and entice private investors to buy loans from lenders themselves.
That would reignite the market for private securitizations, helping to wean the mortgage-bond market off of government support and diminishing the roles of government wards Fannie and Freddie.
"Private secondary market investors are starving for yield, and raising the g-fees to a level where they can compete would allow private capital to come back into the market," says Terry Wakefield, the chief executive of Wakefield Co., a Mequon, Wis., mortgage consulting firm.
The volume discounts Fannie and Freddie gave to large banks have long been a point of contention in the mortgage industry, particularly for community banks and smaller lenders that pay higher fees to cover the risk.
During the housing boom before the financial crisis, the GSEs competed against each other for business and used volume discounts as incentives for the largest lenders to sell them mortgages.
Community bankers have long protested that arrangement. Fannie and Freddie should have been charging lenders like Countrywide Financial Corp. a premium to cover the higher risk of those mortgages, says Ron Haynie, president and chief executive of ICBA Mortgage, a subsidiary of the Independent Community Bankers of America.
He adds that community banks, which originated fewer but better-quality loans, ended up paying higher guarantee fees — requiring them to charge borrowers more and making it tougher for them to compete for business.
"Negotiating fees based on volume is absolutely ridiculous," says Haynie. "The discounts helped drive consolidation to the larger banks."
Ed DeMarco, acting head of the GSEs' primary regulator, has signaled for months that the volume discounts that Fannie and Freddie gave Bank of America
Some mortgage industry members are applauding Congressional efforts to raise the guarantee fees that Fannie Mae and Freddie Mac charge lenders, saying the increases could help bring private investors back into the mortgage market.
As reported by National Mortgage News over the past week, House Republicans and Senate Democrats have proposed legislation that would raise the so-called "g-fees" that banks pay government-sponsored enterprises to cover the risk of defaulting mortgages. The resulting revenue would help the Treasury Department fund an extension of the payroll tax holiday.
The proposals come as Fannie and Freddie have already started raising the guarantee fees that they charge the largest banks.
Private investors have withdrawn from the market, in part, because they cannot compete with the government's rock-bottom prices for mortgage-default guarantees. But if the government raises guarantee fees by a high enough amount, the increases would make the market rates more attractive and entice private investors to buy loans from lenders themselves.
That would reignite the market for private securitizations, helping to wean the mortgage-bond market off of government support and diminishing the roles of government wards Fannie and Freddie.
"Private secondary market investors are starving for yield, and raising the g-fees to a level where they can compete would allow private capital to come back into the market," says Terry Wakefield, the chief executive of Wakefield Co., a Mequon, Wis., mortgage consulting firm.
The volume discounts Fannie and Freddie gave to large banks have long been a point of contention in the mortgage industry, particularly for community banks and smaller lenders that pay higher fees to cover the risk.
During the housing boom before the financial crisis, the GSEs competed against each other for business and used volume discounts as incentives for the largest lenders to sell them mortgages.
Community bankers have long protested that arrangement. Fannie and Freddie should have been charging lenders like Countrywide Financial Corp. a premium to cover the higher risk of those mortgages, says Ron Haynie, president and chief executive of ICBA Mortgage, a subsidiary of the Independent Community Bankers of America.
He adds that community banks, which originated fewer but better-quality loans, ended up paying higher guarantee fees — requiring them to charge borrowers more and making it tougher for them to compete for business.
"Negotiating fees based on volume is absolutely ridiculous," says Haynie. "The discounts helped drive consolidation to the larger banks."
Ed DeMarco, acting head of the GSEs' primary regulator, has signaled for months that the volume discounts that Fannie and Freddie gave Bank of America Corp., Wells Fargo & Co. and other large lenders would be eliminated. DeMarco has argued that the federal subsidy to large banks is unnecessary and could potentially save taxpayers money, since the GSEs are operating under conservatorship and no longer compete against each other.
Haynie, whose organization represents smaller banks, says that ending the discounts to the big banks will "better reflect risk" and allow community banks to remain competitive.
Some mortgage industry members are applauding Congressional efforts to raise the guarantee fees that Fannie Mae and Freddie Mac charge lenders, saying the increases could help bring private investors back into the mortgage market.
As reported by National Mortgage News over the past week, House Republicans and Senate Democrats have proposed legislation that would raise the so-called "g-fees" that banks pay government-sponsored enterprises to cover the risk of defaulting mortgages. The resulting revenue would help the Treasury Department fund an extension of the payroll tax holiday.
The proposals come as Fannie and Freddie have already started raising the guarantee fees that they charge the largest banks.
Private investors have withdrawn from the market, in part, because they cannot compete with the government's rock-bottom prices for mortgage-default guarantees. But if the government raises guarantee fees by a high enough amount, the increases would make the market rates more attractive and entice private investors to buy loans from lenders themselves.
That would reignite the market for private securitizations, helping to wean the mortgage-bond market off of government support and diminishing the roles of government wards Fannie and Freddie.
"Private secondary market investors are starving for yield, and raising the g-fees to a level where they can compete would allow private capital to come back into the market," says Terry Wakefield, the chief executive of Wakefield Co., a Mequon, Wis., mortgage consulting firm.
The volume discounts Fannie and Freddie gave to large banks have long been a point of contention in the mortgage industry, particularly for community banks and smaller lenders that pay higher fees to cover the risk.
During the housing boom before the financial crisis, the GSEs competed against each other for business and used volume discounts as incentives for the largest lenders to sell them mortgages.
Community bankers have long protested that arrangement. Fannie and Freddie should have been charging lenders like Countrywide Financial Corp. a premium to cover the higher risk of those mortgages, says Ron Haynie, president and chief executive of ICBA Mortgage, a subsidiary of the Independent Community Bankers of America.
He adds that community banks, which originated fewer but better-quality loans, ended up paying higher guarantee fees — requiring them to charge borrowers more and making it tougher for them to compete for business.
"Negotiating fees based on volume is absolutely ridiculous," says Haynie. "The discounts helped drive consolidation to the larger banks."
Ed DeMarco, acting head of the GSEs' primary regulator, has signaled for months that the volume discounts that Fannie and Freddie gave Bank of America Corp., Wells Fargo & Co. and other large lenders would be eliminated. DeMarco has argued that the federal subsidy to large banks is unnecessary and could potentially save taxpayers money, since the GSEs are operating under conservatorship and no longer compete against each other.
Haynie, whose organization represents smaller banks, says that ending the discounts to the big banks will "better reflect risk" and allow community banks to remain competitive.
Corp., Wells Fargo & Co. and other large lenders would be eliminated. DeMarco has argued that the federal subsidy to large banks is unnecessary and could potentially save taxpayers money, since the GSEs are operating under conservatorship and no longer compete against each other.
Haynie, whose organization represents smaller banks, says that ending the discounts to the big banks will "better reflect risk" and allow community banks to remain competitive.
