Freddie Mac Boosts Delivery Fees
Following the lead of sister GSE Fannie Mae (FNM), who announced pricing changes on August 5, Freddie Mac (FNM) said late last week that it would also boost its loan delivery fees and alter risk-based pricing structures. In a memo to sellers and servicers that work with the GSE, vice president of customer outreach Patricia McClung said that Freddie would increase its "market condition delivery fee" from 25 basis points to 50 basis points, effective November 7. The new fee will apply to all mortgages sold under flow purchase contracts, included mortgages sold with recourse and indemnification. Last week, Fannie Mae announced it was hiking its so-called "adverse market delivery charge" to a similar 50 basis points, effective October 1. The new charge is likely to make loans more expensive for most consumers, although an adjustment in Freddie Mac's risk-based pricing structure may have the effect of wiping out the incremental addition in delivery fees for certain groups of borrowers. Freddie's bulletin said that it would credit back 25 basis points in delivery fee credits to borrowers with good credit looking to buy a home with the benefit of mortgage insurance, and to borrowers with good credit putting more than 40 percent equity into their purchase. Fannie Mae's pricing matrix made similar adjustments, and introduced a similar fee credit. HW's sources have suggested that this move reflects the credit risk transfer onto mortgage insurers, and the GSE's belief in the solvency of the major insurers they work with. After Fannie's pricing changes, one source said the risk-based pricing adjustments reflected a strategic shift at the GSE. "High LTVs are getting ‘lower’ fees because Fannie is ready to double down on PMIs," said the source, via email. Freddie's changes also included increased pricing for certain cash-out refinance transcations, as well as increased fees on mortgages manually underwritten by the GSE and investment properties. For further information, visit http://www.freddiemac.com. Related links: Single-family seller/servicer bulletin Disclosure: The author was long FRE and held no positions in FNM 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.