FHFA Announces GSE Fee Updates
Written By: Joel Palmer, Op-Ed Writer
The Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac will reduce the upfront fee for commingled securities that was instituted in July 2022.
FHFA announced the fee would be reduced to 9.375 basis points, effective April 1, 2023. The fee is currently 50 basis points.
The fee was designed so that each enterprise can secure the collateral of the other enterprise in commingled securities, known as Supers and real estate mortgage conduit (REMIC) securities.
It was needed, according to FHFA, to accommodate the increased capital requirements in the recently finalized Enterprise Regulatory Capital Framework (ERCF).
The fee is intended to be charged at the time of settlement of the security, though Fannie stated that it reserves the right to charge it post-settlement if a final review of the collateral (post-settlement) demonstrates that commingled securities are present.
A statement from FHFA Director Sandra L. Thompson said the fee reduction "comes as the result of months-long analysis and stakeholder engagement by FHFA to consider a variety of views on the fee and its potential impacts on the Uniform Mortgage-Backed Security (UMBS) market.”
FHFA also announced last week redesigned and recalibrated upfront fee matrices for purchase, rate-term refinance, and cash-out refinance loans for the GSEs’ single-family pricing framework.
The new fee matrices for Fannie and Freddie consist of three base grids by loan purpose for purchase, rate-term refinance, and cash-out refinance loans—recalibrated to new credit score and loan-to-value ratio categories—along with associated loan attributes for each.
The updated fees will take effect for deliveries and acquisitions beginning May 1, 2023, to minimize the potential for market or pipeline disruption.
FHFA said the pricing changes broadly impact purchase and rate-term refinance loans and build on upfront fee changes announced by FHFA in January and October 2022, which have been integrated into the new grids.
The changes are designed to “increase support for borrowers historically underserved by the housing finance market while ensuring a level playing field for small and large lenders, fostering capital accumulation, and achieving viable returns on capital."
A revamped loan-level price adjustments (LLPAs) matrix has also been launched that differentiates pricing by loan purpose.
“By capturing all LLPAs associated with each loan purpose on one page, we believe the new matrix is concise and comprehensive,” said Fannie Mae in its statement of the changes.
“These changes to upfront fees will strengthen the safety and soundness of the Enterprises by enhancing their ability to improve their capital position over time,” said Thompson. “By locking in the upfront fee eliminations announced last October, FHFA is taking another step to ensure that the Enterprises advance their mission of facilitating equitable and sustainable access to homeownership.”
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
