Housing advocates say FHFA g-fee adjustment not enough

NCRC: A step in the right direction, but more needed

In reaction to the Federal Housing Finance Agency’s announcement that it would make just small adjustments to the fees it charges lenders on loans guaranteed by the GSEs, one housing advocacy group says it’s too little.

The FHFA announced on Friday that it is leaving g-fees largely alone but it is revising requirements for private mortgage insurance companies that insure mortgage loans either owned or guaranteed by Fannie Mae and Freddie Mac.

On Monday, the National Community Reinvestment Coalition’s Chief of Membership and Policy Jesse Van Tol said the group is disappointed.

“The FHFA has taken some modest steps in the right direction, but they do not go nearly far enough. We are disappointed that FHFA did not take this opportunity to substantially reduce guarantee fees,” Van Tol said. “A significant reduction in guarantee fees would stimulate the housing market and help to increase access to home loans for low- and moderate-income borrowers.

“While the elimination of adverse market fees was appropriate, it is clear that there is room for FHFA to safely and soundly direct a reduction in the overall fees charged by the GSEs. The current guarantee fee pricing structure overcharges for the credit risk the GSEs currently bear. Friday’s change was largely about balancing the politics of the situation, not the economics,” Van Tol said.

“If you examine the credit risk and administrative costs built into the guarantee fees, they are much lower on average than what the GSEs are actually charging,” he said. “Additionally, recent risk-sharing deals show that the private market is pricing credit risk comparable to that taken by Fannie Mae and Freddie Mac at levels well below the guarantee fees the GSEs are charging.”

FHFA announced Friday that it will remove the 25 basis point upfront adverse market charge for all states. The charge was put in place during the height of housing crisis.

In January, NCRC called on FHFA to reduce guarantee fees. In December of 2014, NCRC applauded FHFA Director Mel Watt’s decision to fund the National Housing Trust Fund and the Capital Magnet Fund.

In October of 2014, NCRC called upon FHFA to strengthen its proposed affordable housing goals and applauded FHFA’s revised and clarified Representation and Warranty framework.

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