GSEs to Raise G-Fees by Average of 10 Basis Points
The FHA Condos Approval Company
Before the end of this year, Fannie Mae and Freddie Mac will raise guarantee fees (g-fees) on single-family mortgages by an average of 10 basis points.
When the GSEs provide mortgage-backed securities (MBS), they guarantee the payment of principal and interest on the securities and charge a g-fee for the guarantee. The fee is used to cover potential credit losses in case a borrower defaults and for administrative costs.
On Friday, FHFA, the GSEs’ conservator, announced it has directed Fannie Mae and Freddie Mac to increase g-fees as a step toward encouraging more mortgage market participation from private firms.
“These changes will move Fannie Mae and Freddie Mac pricing closer to the level one might expect to see if mortgage credit risk was borne solely by private capital,” said Edward J. DeMarco, Acting Director of FHFA, stated in a release.
The increases are scheduled to take effect on December 1 for loans exchanged for mortgage-backed securities. For loans sold for cash, the increases are scheduled for November 1, 2012.
In addition to making the announcement, FHFA released a report on single-family g-fees for 2010 and 2011, which found the GSEs, on average, increased g-fees by 26 basis points in 2010 and 28 basis points in 2011.
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