The Federal Housing Finance Agency (FHFA) has released its third annual report on guarantee fees (g-fees) charged by the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac. concluding that the average “g-fee” on single-family mortgages increased in 2010
relative to 2009, from 22 basis points to 26 basis points. The FHFA currently serves as the conservator of the GSEs.
The report, "Fannie Mae and Freddie Mac Single-Family Guarantee Fees in 2009 and 2010," finds that the GSEs’ g-fees continued to convey cross-subsidies from mortgages that posed lower credit risk, on average, to loans that posed higher credit risk, but overall that cross-subsidization was substantially less in 2009 and 2010 than in 2007 or 2008.
Lenders that delivered smaller volumes of mortgages to the GSEs, on average, paid higher guarantee fees on loans of similar credit quality than did larger-volume lenders.
The Housing and Economic Recovery Act of 2008 (HERA) requires FHFA to study the fees charged by the GSEs for guaranteeing securities backed by single-family mortgages that are not insured or guaranteed by the federal government and that finance properties with four or fewer residential units. Those fees cover projected credit losses from borrower defaults over the life of the loans, administrative costs, and a return on capital.
In addition to estimated costs and the competitive environment, the GSEs consider a number of other factors in determining the single-family guarantee fees they charge. Those factors include the mandates of safety and soundness, regulatory affordable housing goals, and their charter obligations.