Fannie Mae Shelves Delivery Charge Hike

Fannie Mae (FNM: 1.04 -7.14%) announced late Thursday that it will scrap a planned increase in its existing adverse market delivery charge.

Fannie first announced the delivery charges in December 2007 in response to “accelerated deterioration of market conditions.” The 0.25 percent upfront charge was set to apply to all whole loan mortgages purchased and all mortgage loans packaged into mortgage-backed securities as of March 1, 2008.

Fannie’s delivery charge was scheduled to jump 25 basis points to 50 basis points for every loan beginning Nov. 1, likely heightening the burden on consumers. The increase’s cancellation should keep costs to prospective borrowers low and encourage continued lending in a credit-frozen market.

The fees are another way both Washington-based Fannie and brother mortgage giant Freddie Mac (FRE: 1.23 -1.60%) attempted to offset the higher credit costs associated with the downturn in the U.S. housing market as well as the increased portfolio risk arising from higher legislated lending limits.

The decision to eliminate the surcharge hike resulted from Fannie’s evaluation of “risk management, underwriting guidelines, pricing and costs,” Fannie Mae chief executive Herbert M. Allison Jr. told the media Friday.

The announcement comes almost a month after both government-sponsored entities fell into conservatorship. Since falling into government control, the GSEs have been “modifying their business practices in recent weeks with an eye on the health of the housing market rather than their earnings,” according to a Reuters report Thursday.

We at HW have to wonder where the strings are attached to such a move, especially with President George W. Bush’s recent comments on Fannie and Freddie’s role in Wall Street corruption.

Disclosure: The author held no relevant positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.