Fannie Mae fee likely to raise loan costs
NEW YORK - Fannie Mae, the largest US mortgage-finance company, will raise a fee it charges lenders to buy their mortgages or guarantee home-loan securities, a move that may increase costs for borrowers.
Fannie Mae's "adverse market delivery charge," introduced this year for all mortgages that the company helps finance, will rise to 0.50 percentage point on Oct. 1, from 0.25 percentage point, according to a letter to lenders posted on the Washington-based company's website.
Government-chartered Fannie Mae and Freddie Mac have been tightening standards and raising fees since last year to boost revenue and limit losses amid the worst housing slump since the 1930s. The changes have made it harder or more expensive for borrowers to get home financing, contributing to deeper price drops, said consultant David Lykken of Mortgage Banking Solutions in Austin, Texas.
Fannie Mae and Freddie Mac now finance about 70 percent of new US home loans, according to analysts at Morgan Stanley. Congress last month enacted an emergency-rescue plan for the companies after a plunge in their share prices sparked a crisis in confidence. Stock analysts expect the companies to report net losses through the first quarter of 2009.
In the letter Monday, Fannie Mae also said it adjusted what it will pay for, or charge in guarantee fees, on loans with certain down payments, borrower credit scores, or combinations of the two.
"Fannie Mae is announcing these changes to better align pricing with credit risks, mitigate losses, and support Fannie Mae's ability to provide a stable source of liquidity to lender partners," said a company spokeswoman.
The increase in rates on Fannie Mae loans from the various changes will range between 0.06 percentage point and 0.18 percentage point, according to Barclays Capital analysts.
Fannie Mae announced the adverse-market fee in December and put it into effect in March. McLean, Va.-based Freddie Mac also began charging a similar 0.25 percentage point fee. "We're always looking at our fees in light of market developments," a Freddie Mac spokesman said.
With Fannie Mae's new adverse-market fee, a lender selling a $300,000 mortgage to the company will forfeit $1,500, up from $750. The lender, which would typically make less than $3,000 on the sale, could get paid more to offset the charge by raising the interest rate on the loan.
Fannie Mae, Freddie Mac, mortgage insurers, and banks have also introduced tighter qualifications or higher costs for other loans.
Fannie Mae, which Congress created to expand homeownership and provide market stability, also has loosened some standards over the past year to combat the housing crisis and address critics.
In May, Fannie Mae said it would scrap a rule that boosted down payment requirements by 5 percent in areas with falling prices, in favor of national limits that eliminated the company's 100 percent financing programs.
