Special Update: G-Fee Increases 12.28.11

2017-12-20T17:34:14+00:00 December 28th, 2011|Categories: Special Update|Tags: , , , , , , , , , , , |

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 [...]