GSEs to Make Small Changes in Mortgage Guarantee Fees

Freddie Mac and Fannie Mae have been directed to make structural changes to their mortgage guarantee fees by the Federal Housing Finance Agency. The changes are to take effect on September 1st 2015. They are designed to leave the revenues of the government-sponsored enterprises “neutral”.

Despite the structural changes, the mortgage guarantee fees, informally known as g-fees, will not change significantly for borrowers. Since they are integrated into the rates of mortgage loans, the FHFA has estimated that the largest rate decline for borrowers will not exceed 0.05 percentage points. The largest increase in the rates of some loans will be no greater than 0.07 to 0.1 percentage points.

There will be two types of changes in the mortgage guarantee fees charged by Freddie Mac and Fannie Mae. The upfront adverse market charge of 0.25 percentage points is getting removed. This charge was introduced back in 2008 as a response to the adverse conditions in the housing market. In light of the recent improvements, the FHFA has decided to remove it nationwide.

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The second type of change is targeted towards specific loans offered by Freddie Mac and Fannie Mae. In case of mortgage loans with a term over 15 years and loan-to-value ratio of 80% or lower and borrower credit score of 700 or higher there will be an increase in the upfront fees of 0.25 percentage points. In case of LTV higher than 80% and credit score lower than 700, the upfront fees will remain practically unchanged. All jumbo loans which are conforming will receive an upfront fee increase of 0.25 percentage points as well.

In addition to the g-fee modifications which are designed to keep the revenue of Freddie Mac and Fannie Mae virtually unchanged, the FHFA will set new financial and operational standards that private mortgage insurers must meet in order to be approved insurers with the GSEs.



Jessie Jessie is a corporate communications and public relations professional skilled in media relations, strategic communications, crisis and issues management, writing and editing. She excels in managing multiple, high-priority tasks and working in high-stakes environments. Jessie has more than 10 years experience writing editing both print and online content. She is a graduate of Illinois State University with a Masters degree in English and writing.


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