FHFA Acting Director DeMarco announced yesterday an increase in the ongoing guaranty fee (g-fee) of 10 basis points on all loans sold to Fannie and Freddie beginning March 1, 2014 and for all loans guaranteed in mortgage-backed securities with settlements on or after April 1, 2014. In addition, he announced the end of the 25 basis point one-time up-front adverse market fee for all states except New York, New Jersey, Connecticut, and Florida (high cost foreclosure states). This fee has been in effect since 2008. This too will be effective on March 1 and April 1 as described above. There also will be changes to the up-front risk based pricing grid. Mel Watt is expected to be confirmed soon as the new FHFA Director, and he will have the discretion to alter these policies.
On August 31st, FHFA announced another increase in the guarantee fee (G-fee) charged by Fannie Mae and Freddie Mac on the loans they insure. The amount of the increase is set to average 10 basis points, but the amount of the increase may vary by product and seller. The increase is to be effective on loans sold directly to Fannie or Freddie beginning in November and for any loans to be pooled in a mortgage-backed security (MBS) with a December 1st or later issue date. Longer term locks already reflect this increase. Short term locks may as well, depending who is buying the loan and whether the loan will be pooled in a MBS. If they don't now, they will very soon. G-fees are paid by the borrower from the interest paid on the loan or are collected upfront as a cost to the borrower. The cost is approximately five times the increase in G-fee. The effect of this increase in G-fee on the borrower has been masked somewhat by recent price increases in the MBS market. Loans locked at prices before the G-fee increase was added will incur heavy extension fees, if required, so timely delivery of well documented, [...]
FHFA has answered a couple of the questions we raised on Tuesday regarding the Congressionally mandated increase in Fannie Mae and Freddie Mac guarantee fees (G-fees). Effective April 1st all G-fees charged by Fannie and Freddie will be increased by 10 basis points. In addition, FHFA said that during the first part of 2012 they will determine whether the new law will require additional increases in the G-fees. Since G-fees are paid from the interest on a loan, this increase will cause mortgage rates on loans going into Fannie and Freddie mortgage-backed securities after April 1st to rise by a similar amount.
On Friday, President Obama signed into law the Temporary Payroll Tax Cut Continuation Act. This Act uses increased guarantee fees on new mortgages to pay for reduced payroll taxes. The amount of the g-fee increases will be included in future mortgage rates. Below are general provisions pertaining to increasing the Guarantee Fees for Fannie, Freddie, and FHA. Several elements in the bill are not quite clear and may take weeks or months to determine. The primary questions are: 1. How much will the Fannie and Freddie g-fee rise? The Act calls for a minimum increase of 10 basis points, but the amount of the increase is to be determined by FHFA and is supposed to a)"cover the risk of loss associated with the guarantee", and b) be based on "the cost of capital allocated to similar assets held by other fully private regulated financial institutions". This definition could result in a wide range of fee increases. The early expectation from insiders is that the increase will be 10 basis points. 2. When will the increase become effective? The Act says the increase is to be applied to guarantees issued after enactment of this section. The date this provision is to [...]
This morning, FHFA announced their enhancements to the HARP refinancing program. Operational details of the plan are to be released on November 15. Only loans that were purchased or guaranteed by Fannie Mae or Freddie Mac on or before May 31, 2009 and have a current LTV over 80% are eligible. In addition, the loan must be current, no late payments in the last six months and no more than one late in the last 12 months. There are no restrictions on who may refinance these loans. Program guidelines include: *No limit on LTV, if new loan is a fixed rate loan (current LTV must be above 80%) *Loans previously refinanced under HARP not allowed *Certain agency fees will be waived if new loan is a shorter term loan *Appraisals not required where Agency AVM is available *Certain originator Reps and Warrants will be waived Borrowers can determine if their loan is owned or guaranteed by Fannie or Freddie at http://www.fanniemae.com/loanlookup/ or http://www.freddiemac.com/corporate/ If you need additional information about this blog post, please visit our website MBSQuoteline.com or call 800-627-1077.
So overall, lenders seem to be content with HVCC. That’s one out of four. But how about appraisers? The popular method for lenders to comply with HVCC has been to contract with an appraisal management company (AMC) to handle the appraisal process (though some are managing the process internally). In this arrangement, the appraisal order is placed with the AMC by a non-production person in the lender’s office, the order is assigned on a random basis to one of the appraisers in a pool, and if the appraiser accepts the order, the appraisal goes forward. Sounds simple enough and workable, right? Most appraisers I’ve talked to are somewhat ambivalent on the issue. They’ve lost business from long term, cultivated, relationships but picked up business from others in the random assignment process. There’s a middleman now (remember the AMC) and middlemen have to get paid. We’ve all heard of AMCs demanding appraisers to accept a lower fee for reports to be on their panel. A common refrain is less qualified appraisers that otherwise might not be able to get business on their own, gladly step in on these terms with the result being poorer quality appraisals. So, appraisers have had to [...]
The industry has had a year to operate within HVCC guidelines and the benefits of it pretty clearly depend on just whom you ask. May 1, 2009 marked the implementation of another regulation on the mortgage industry when Fannie Mae and Freddie Mac adopted the Home Valuation Code of Conduct (HVCC) as a result of an agreement between their regulator, the Federal Housing Finance Agency (FHFA), and the New York State Attorney General. One of many initiatives aimed at improving loan quality in the wake of the subprime market meltdown (and we’re finding quality problems weren’t limited to the subprime market) HVCC’s intent was to ensure appraiser independence in the valuation process, thereby improving appraisal quality. Doing so, it was reasoned, would better serve lenders because they would get more accurate valuations on which to base their loan decisions. And borrowers as well would be protected from obligating themselves on loan amounts based on inflated property values. So is HVCC working? Well, who are you asking? Basically you have four different players in the origination process impacted by HVCC- the lender (and we’ll include Fannie and Freddie in this category to keep it simpler), the appraiser, the originator and the [...]