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Investments / Lending

Wells Fargo expects G-fee change next year

Analysts predict a 10bp increase

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When the Federal Housing Finance Agency announced Thursday that it would be seeking input on changes to the guarantee fees that Fannie Mae and Freddie Mac charge lenders, it left everyone wondering just what changes the FHFA is considering.

Could the G-fees be rising, as Ed DeMarco originally proposed in December? Or are other alternatives, like subsidizing G-fees by increasing fees for higher credit borrowers, under consideration?

According to analysts from Wells Fargo, a G-fee increase may be coming in the future, but any changes to G-fees will be “next year’s event.”

Wells Fargo’s analysts suggest that the FHFA may increase the G-fees by 10 basis points on average, as was announced last year, “but with less risk-based pricing than in the FHFA’s previous proposed g-fee increases.”

The FHFA’s original plan would have seen the base g-fee, or ongoing g-fee, for all mortgages increase by 10 basis points. That would have represented an average increase of 14 basis points on typical 30-year mortgages and 4 basis points on 15-year mortgages.

The plan was also to eliminate the up-front 25 basis point adverse market fee assessed on all mortgages purchased by Freddie and Fannie.

FHFA Director Mel Watt reversed his predecessor’s plans in January, when the FHFA announced that it was delaying the G-fee increase to allow Watt to review the changes. At the time, Watt said that the implications of a G-fee increase could be “significant,” and that he wanted to fully understand the ramifications of an increase before making any adjustments to the fees.

Now it appears that any G-fee changes won’t happen until 2015.

“We expect any changes to the g-fees to be a ‘next year’s’ event, as the FHFA stated it would give at least a six months’ notice before making any changes,” Wells Fargo’s analysts said. “We think the request for comment suggests some eventual g-fee increase in the future.”

The FHFA is seeking answers to 12 questions related to the G-fees with its “Request for Input” form. Comments on the potential G-fee changes are due on August 4.

Click here to read the entire “Request for Input” from the FHFA.

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