Watt: I’ll delay hikes in conforming loan feesby Keith Gumbinger
Incoming head of the Federal Housing Finance Agency Mel Watt may keep a slated increase in borrowing costs from hitting conforming loan borrowers for at least a while longer.
Increases in the loan-guarantee fees charged to lenders (aka “G-fees”) — a kind of insurance that the payments on the loan will be made — were slated to increase starting in March, and risk-based pricing elements (called Loan Level Pricing Adjustments) to compensate for low credit scores and/or low down payments by borrowers were scheduled to rise sharply for loans delivered to Fannie or Freddie on or after April 1.
As it can take 60 days or longer to get a loan closed these days — and with changes to required documentation and more expected to gum up the works in the early part of the year — these fees would probably have started to be seen in mortgage pricing in just a few weeks’ time.
Mr. Watt is expected to be confirmed as the new head of the FHFA on January 6.
Mr. Watt’s full statement released on Dec. 20:
“Upon being sworn in as director of the Federal Housing Finance Agency, I intend to announce that the FHFA will delay implementation of the [guarantee] fee and risk-based pricing plan announced in the FHFA’s News Release dated December 9, 2013 (and detailed more fully in the Loan-Level Price Adjustment Matrix released earlier this week) until such time as I have had the opportunity to evaluate fully the rationale for the plan and the plan’s likely impact on the [companies’] risk exposure, the cost and availability of credit and how the plan would interface with the qualified mortgage standards.
I do not expect to elaborate further on this statement until after I have been sworn in as director of the FHFA in January.”
With Fannie and Freddie pushing for continued solvency, and with efforts to make the costs of GSE-backed loans equivalent with those written with “private” capital, it is still likely that at least some of these fees will come into the market in 2014, most probably the G-fee increases. We’ll need to wait and see what Mr. Watt does, but we may get though the spring homebuying season before borrowers will face these increases.