FHFA: Average Guarantee Fee Fell by 2 Basis Points in 2016

The Federal Housing Finance Agency said “competitive pressures” between Fannie Mae and Freddie Mac resulted in an average two basis-point drop in average single-family guarantee fees in 2016, from 59 basis points to 57 basis points.

The Agency’s 2016 Report to Congress on Guarantee Fees released yesterday also reported The average guarantee fee in 2016 on fixed-rate, 30-year loans fell by 2 basis points to 61 basis points; the fee on fixed-rate, 15-year loans fell by 4 basis points to 37 basis points; and the fee on adjustable-rate mortgage loans remained steady at 59 basis points.

Guarantee fees are intended to cover the costs the government-sponsored enterprises, Fannie Mae and Freddie Mac, incur for guaranteeing payment of principal and interest on single-family loans they acquire from mortgage lenders. These costs include projected credit losses from borrower defaults over the life of the loans, administrative costs and a return on capital.

However, the g-fees are controversial because as recently as 2013, Congress has authorized increases in g-fees but used them to offset other non-GSE spending. The Mortgage Bankers Association has fought successfully in recent years to prevent g-fee increases for funding other than their intended purpose.

FHFA also reported extra-small lenders paid, on average, 2 basis points less than extra-large lenders in total guarantee fees in 2016. G-fees among the size groups have been comparable, with only small differences in any year since 2013.

The report can be accessed at https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/GFeeReport10172017.pdf.