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Freddie and Fannie to Lower Some Fees
The federal regulator of Fannie Mae and Freddie Mac plans to lower the mortgage fees paid by some borrowers, but the move would amount to only modest help for risky buyers with checkered credit histories.
The Federal Housing Finance Agency is expected to announce in coming days changes to fees that Fannie and Freddie charge lenders to guarantee mortgages, according to people briefed on the matter.
For those borrowers affected by the changes, the benefits would be tiny, amounting to less than one-tenth of a percentage point. Fannie and Freddie, which back most home loans, will raise fees for other borrowers, like those who buy investment properties, to balance out the cost of the fee reduction. The changes are not expected to have any effect on revenue.
Julia Gordon, senior director of housing and consumer finance for the Center for American Progress, said the change in fees was in the right direction but didn’t go far enough. “Hopefully over time we can go further,” she said.
The Wall Street Journal first reported the agency’s plans.
Ms. Gordon’s remarks echoed the sentiment of other housing advocates who had been frustrated with the slow and cautious approach taken by Melvin L. Watt, the agency’s director since January 2014.
Mr. Watt, a Democrat, is caught between those on the left who want the government to assume more risk so that greater numbers of people with weaker credit standing can buy homes, versus those on Wall Street and Republicans in Congress who say he should let the private market assume more of the responsibility for financing home purchases.
Just after he arrived at his new job, Mr. Watt announced he would block the course of his predecessor, Edward DeMarco, who had planned to increase fees as a way to encourage more private investment and foster competition from other lenders in the secondary mortgage market.
Fannie and Freddie buy loans from private lenders, package them into mortgage-backed securities and provide a credit guarantee to investors to ensure timely payment.
The government placed both mortgage giants in conservatorship during the housing crisis and they received a huge taxpayer bailout to avoid bankruptcies. They now pay nearly all of their profits to the Treasury.
So far during his tenure, Mr. Watt has pursued several relatively modest steps to support the housing market, including encouraging down payments as low as 3 percent of the purchase price for buyers who are short on cash. Some housing specialists called the plan too risky, potentially leading to more defaults. Mr. Watt defended the action, saying the loans would come with credit counseling to reduce the risk of foreclosures.
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