MortgageMortgage Rates

FHFA delays inevitable g-fee hike

Industry unsure of the agency's next move

Just before Rep. Mel Watt, D-N.C., was officially sworn in as director of the Federal Housing Finance Agency, the agency said it would increase guarantee fees.

But that initiative was short lived. A month later, new FHFA director Rep. Mel Watt delayed the rule.

While the g-fee hike would not have been that dramatic, the sudden accumulation of pricing changes would have had a definitive impact, but the g-fee hike alone would not have created a giant rush to the market, Quicken Loans Chief Economist Bob Walters said.

But it is the long-term consequences that lenders are concerned about.

"Though we are seeing signs of improvement in the real estate sector, we must avoid taking any steps that could keep housing consumers on the sidelines and hinder that recovery, while possibly delaying implementation of the necessary reforms required of the GSEs," several industry trade groups said in a letter to regulators.

The Mortgage Bankers Association along with the National Association of Realtors urged regulators to oppose the use of guarantee fees as an offset to the cost of the emergency Unemployment Compensation Extension Act.

"We believe last week’s announcement, coupled with the release of the new grids, marks a significant shift in FHFA’s policy, moving from a gradual approach to attracting private capital to one designed to shock private capital back into the market. This is a dangerous and misguided approach," said David Stevens, president and CEO of the MBA, in a letter to association members.

"MBA is deeply concerned that these initiatives from the FHFA come on the heels of other policy actions that threaten to undermine the recovery and stabilization of the housing market," Stevens’ added.

Although this one delay will not hinder the market significantly, if Watt stopped all future g-fee hikes it would stall capital markets, Walters explained.  

"We have new leadership, which I think implies that we will not see the increase in g-fees for now. It is probably not going to be a top priority because the housing policy under new leadership will probably be more user or borrower or consumer friendly," said Sarah Hu, director of markets and international banking for Royal Bank of Scotland. "I don’t think it is a big surprise."

But the good news really comes for home shoppers.

"Anybody on the sidelines that can refinance should act now versus later since we just saw what is likely to happen," Walters said.

Borrowers just received a second chance to purchase a home before rates increase from g-fees, he added. 

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