As the Federal Housing Finance Agency continues to seek input on guarantee fees, according to the Urban Institute, the process might not be too easy to conquer.

In FHFA Director Mel Watt’s first major policy speech in May, he said that the FHFA would seek comments on G-fee increases. In that speech, he said, “As many of you know, I issued a directive to the Enterprises that they delay the guarantee fee increase announced in December of last year. In our request for input, we will pose a number of questions the agency is considering, and we solicit and encourage your feedback.”

“FHFA’s Request for Input includes questions related to G-fee policy and implementation regarding the optimum level of G-fees required to protect taxpayers and implications for mortgage credit availability,” the agency said.

At the end of July, Watt extended the deadline for industry input to Sept. 8 from Aug. 4.

This process won’t be a simple task though, with the Urban Institute concluding that that guarantee fee determination is an art, not a science. A few decisions could change the whole picture.

In order to calculate the impact of potential fee changes, the institute had to assumer three things:

1. Whether to count future g-fee premiums as capital

2. What returns on equity to assume

3. What, if any, capital buffer to require of the GSEs beyond that needed to cover expected under a stress scenario

From here, it was able to come to three conclusions:

1. There is no room to increase fees for the safest loans.

2. For other loans, the most appropriate fee depends on the chosen assumptions

3. The GSE’s mission needs to guide the chosen assumptions