Fannie, Freddie to Lower Fees for Some Borrowers

4/15/15
 
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from The Wall Street Journal,
4/15/15:

Modest changes likely to disappoint affordable-housing advocates.

After more than a year of deliberations, the regulator of Fannie Mae and Freddie Mac will direct the companies to reduce mortgage fees on some borrowers. But the changes are so modest that affordable housing advocates are likely to be disappointed while conservative politicians, who’ve called for higher fees, could blast the move.

As soon as this week, officials at the Federal Housing Finance Agency are expected to unveil changes to guarantee fees, which are the fees Fannie and Freddie charge lenders to guarantee mortgages. Such charges flow through to borrowers in the form of mortgage rates.

Riskier borrowers, who make lower down payments and have lower credit scores, will see slight savings that could translate to merely hundredths of a percentage point on a mortgage rate, according to people familiar with the matter. To cover the cost of the reductions, Fannie and Freddie will raise fees on some other borrowers—such as those borrowing for an investment property—with the intent of the changes to be revenue neutral for Fannie and Freddie, the people said.

Nevertheless, the changes that are being made—which include the termination of a borrowing surcharge imposed by Fannie and Freddie during the financial crisis—are likely to draw the ire of some conservatives on Capitol Hill, who believe that the government is generally encouraging riskier lending practices.

In the past year, some conservatives have criticized Mr. Watt’s decision to allow Fannie and Freddie to back loans made to borrowers with down payments of as little as 3%, down from the previous 5% minimum.

Separately, the Federal Housing Administration—which insures loans to borrowers who make down payments of as little as 3.5%—in January said it would cut fees by 0.5 percentage point for most borrowers.

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