Incoming head of the Federal Housing Finance Agency (FHFA) Mel Watt has indicated that he plans to delay an increase in mortgage fees charged by the largest housing finance firms in the country. Watt, who will be sworn in on Jan. 6, will continue to oversee an FHFA that puts a greater emphasis on decreasing the power and value of the GSEs (Fannie Mae and Freddie Mac). Fannie and Freddie both unveiled the specifics behind their fee increases last week; however, this news has sent a ripple throughout the industry that Watt wants to take a better look at Fannie and Freddie’s current slate of offerings and systems before making a final decision.
“I felt it was important to announce my intentions now because of the prospect that some lenders could start to price the proposed changes into the market well before the effective dates,” Watt said in a statement.
The planned increases were centered around loans provided to borrowers without perfect credit scores or didn’t provide a substantial downpayment. The GSE fee hikes would predominantly affect New York, Connecticut, Florida and New Jersey, according to former Acting Director Edward J. DeMarco. States with long foreclosure timelines typically result in extended fees, so it’s natural that states with extended timelines would see a fee increase, whether one believes a fee increase to be fair or not.
“Consumers absolutely win with the move to delay increase in the Fannie Mae loan pricing adjustments. I understand the desire to private capital to jump back into the housing market,” said John H.P. Hudson, VP of regulatory affairs, Premier Nationwide Lending. “However, consumers and the industry must both digest the impact of Dodd-Frank’s mandated Ability-to-Repay and Qualified Mortgage. If these increases took place today, the end result would only be less affordability and a downward pressure on home values in a still fragile housing market.”
It’s encouraging to see an elected official not looking to make a decision without first analyzing the problem from every conceivable angle. While it’s entirely too early to call Watt a friend of the mortgage industry, it’s certainly fascinating that he’s looking before he leaps. This fee increase could be a way for Fannie and Freddie to recoup the amounts paid to the Fed since the 2008 bailout, as both GSEs have forked over around $185.2 billion over the past five years. Fannie and Freddie currently back around 60 percent of U.S. home mortgages.
