"On Dec. 23, 2011, President Obama signed into law the Temporary Payroll Tax Cut Continuation Act of 2011. Among its provisions, this new law directs the Federal Housing Finance Agency (FHFA) to increase guarantee fees charged by Fannie Mae and Freddie Mac (the Enterprises) by no less than 10 basis points from the average guarantee fees charged by these companies in 2011 on single-family mortgage-backed securities.

This requirement is effective immediately, meaning that the average guarantee fees charged in 2012 need be at least 10 basis points greater than the average guarantee fees charged in 2011 and that this increase be remitted to the U.S. Treasury, rather than retained as reserves by the Enterprises. The law also requires FHFA to determine a schedule for guarantee fee increases over a two-year period that must satisfy other requirements of the law.

To begin implementation of these requirements, today I am directing Fannie Mae and Freddie Mac to announce before year-end to their seller-servicers that, effective April 1, 2012, the guarantee fee on all single-family residential mortgages shall increase by 10 basis points.

In early 2012, FHFA will further analyze whether additional guarantee fee increases are appropriate to ensure the new requirements are being met. FHFA will announce plans for further guarantee fee increases or other fee adjustments that will then be implemented gradually over the two-year implementation window, taking into consideration risk levels and conditions in financial markets. FHFA will monitor closely the increased guarantee fees imposed as a result of the new law throughout its effective period, which ends Oct. 1, 2021."

The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 12 Federal Home Loan Banks. These government-sponsored enterprises provide more than $5.7 trillion in funding for the U.S. mortgage markets and financial institutions.

2) Why should this concern the mortgage business and you? 

Basically for the first time the government is now for the 1st time diverting funds from fannie and freddie via a .10 higher guarantee fee to pay for general government expenses.  So what is meant to limit the cost to taxpayers will end up being passed on to new borrowers by via interest rates.

Other points of interest.....

Fannie Mae, Freddie Mac and the FHA currently back more than 90 percent of loan originations this past year

The raising guarantee fee will not be used to offset risk of loan default.....as it is intended to do.

This sets a bad precedent on how the government is going to raise revenue through effectively taxing fannie and freddie loans.

What happened to the plans to reverse the trend and reduce the governments involvement in the mortgage business this year?  This plan will only expand their role.

Take care,

Jamie Larkin  CRMS, MMS

www.jamielarkin.com

Licensed Mortgage Professional