I blame Bush
Fannie Mae fee increase “postponed”.
U.S. Representative Mel Watt, who will leave Congress to become regulator of Fannie Mae and Freddie Mac , said he will delay a planned increase in the fees the U.S.-owned companies charge to guarantee mortgages.
Watt, who is scheduled to be sworn in as director of the Federal Housing Finance Agency on Jan. 6, said in a statement yesterday that he needs time to evaluate fee increases announced this month by Edward J. DeMarco, the agency’s acting chiefWatt, a North Carolina Democrat, was confirmed by the Senate as FHFA director on Dec. 10. A day earlier, DeMarco said Fannie Mae (FNMA) and Freddie Mac would raise fees by 10 basis points as part of an effort to shrink their mortgage-market footprint.
The companies, which have been under U.S. conservatorship since 2008, buy loans and package them into securities on which they guarantee payments of principal and interest. They now back about 60 percent of U.S. home mortgages.
DeMarco also said the companies would start charging higher fees in New York, New Jersey, Connecticut and Florida, states where long foreclosure timelines make it more expensive for the government-sponsored enterprises to dispose of properties they take over after borrowers default. He said the companies also would shift their fee structure so borrowers with poor credit would pay more.
Watt said he intends to delay all of those changes until he has time “to evaluate fully the rationale for the plan” and how it would affect the availability of credit and the companies’ risk exposure.
There was a time – remember the housing bubble? When some critics complained that it was caused by the extension of credit to homebuyers could not afford to buy a house nor keep up with payments. That’s all forgotten.
Here’s what Fannie Mae had proposed:
The mortgage giants said late Monday that, at the direction of their regulator, they will charge higher fees on loans to borrowers who don’t make large down payments or don’t have high credit scores—a group that represents a large share of home buyers. Such fees are typically passed along to borrowers, resulting in higher mortgage rates.
Fannie and Freddie, which currently back about two-thirds of new mortgages, don’t directly make mortgages but instead buy them from lenders. The changes are aimed at leveling the playing field between the government-owned companies and private providers of capital, who are mostly out of the mortgage market now. Fannie and Freddie were bailed out by the government during the financial crisis but are now highly profitable.
The Federal Housing Finance Agency last week signaled the fee increases but didn’t provide details. The agency’s move came one day before the Senate voted to confirm Rep. Mel Watt (D., N.C.) as its director. It isn’t clear whether Mr. Watt, who hasn’t yet been sworn in, weighed in on the changes. An FHFA spokeswoman declined to comment on any discussions with Mr. Watt, who also declined to comment.
Mr. Watt will face heavy pressure by consumer groups and the real-estate industry to reverse course, industry officials said Tuesday. “There will be significant opposition very quickly once people understand what is actually being implemented,” said Martin Eakes, chief executive of the Center for Responsible Lending in Durham, N.C., a consumer-advocacy nonprofit.
Don’t you just love “New Speak”, where the meaning is exactly the opposite of what is said?