FHFA: Freddie Mac Fails 2020 Low-Income Refi Goal; GSE Guarantee Fees Fall

The Federal Housing Finance Agency announced final determinations for Fannie Mae/Freddie Mac performance on their 2020 housing goals, saying Freddie Mac failed to meet a key goal.

The report said during 2020, Fannie Mae met all of its single-family and multifamily housing goals. Freddie Mac met the single-family purchase goals for low-income families, very low-income families and low-income areas, and all of the multifamily goals, but failed to meet the low-income refinance goal. FHFA notified Freddie Mac that it must prepare a housing plan describing the actions it will take during 2022-2024 to improve its performance on the low-income refinance goal.

“Mortgage rates remain near historic lows, giving borrowers a chance to lower their monthly mortgage payments and improve their financial health,” said FHFA Acting Director Sandra L. Thompson. “It is imperative that Freddie Mac develop a business strategy to support more low-income households in taking advantage of this important refinance opportunity. With the new housing plan announced today, Freddie Mac can start correcting course and put itself on a path to meet its obligations in the future. Meeting the housing goals is not optional, and FHFA will continue to work with the Enterprises to ensure they meet their statutory and Conservatorship Scorecard requirements.”

Separately, FHFA issued its annual report on single-family guarantee fees charged by Fannie Mae and Freddie Mac, noting for all loan products combined, the average single-family guarantee fee in 2020 decreased 2 basis points to 54 basis points.

FHFA said the upfront portion of the guarantee fee, which is based on the credit risk attributes (e.g., loan purpose, loan-to-value ratio and credit score), decreased 2 basis points to 11 basis points on average. The ongoing portion of the guarantee fee, which is based on the product type (fixed-rate or adjustable-rate, and loan term), remained unchanged at 43 basis points on average.

The average guarantee fee in 2020 on 30-year and 15-year fixed rate loans remained unchanged at 58 basis points and 36 basis points, respectively. The fee on adjustable-rate mortgage loans increased by 1 basis point to 57 basis points.

FHFA said guarantee fees are intended to cover credit risk and other costs that the Enterprises incur when they acquire single-family loans from lenders. These costs include projected credit losses from borrower defaults over the life of the loans, administrative costs and a return on capital.