The Federal Housing Finance Agency (FHFA) today released its annual report on single-family guarantee fees charged by Fannie Mae and Freddie Mac (the Enterprises). The Housing and Economic Recovery Act of 2008 requires FHFA to conduct an ongoing study of the guarantee fees charged by the Enterprises and to submit a report to Congress each year.
Guarantee fees are intended to cover the credit risk and other costs that Fannie Mae and Freddie Mac incur when they acquire single-family loans from lenders. These include projected credit losses from borrower defaults over the life of the loans, administrative costs, and a return on capital. The report compares year-over-year 2017 to 2016, and provides data over five years back to 2013. Significant findings of the report include:
- For all loan products combined, the average single-family guarantee fee in 2017 was unchanged at 56 basis points. The upfront portion of the guarantee fee, which is based on credit risk, fell one basis point to 15 basis points. The ongoing portion of the guarantee fee, which is based on the product type, increased one basis point to 41 basis points.
- The average guarantee fee on 30-year fixed rate loans fell by one basis point in 2017 to 59 basis points, while the fee on 15-year fixed rate loans increased by one basis point to 38 basis points. The fee on ARM loans fell one basis point to 58 basis points.
- In 2017, the Enterprises began using FHFA’s Conservatorship Capital Framework (CCF) to calculate the cost of holding capital. The overall expected profitability of the loan acquisitions was nearly unchanged in 2017 and in-line with the targeted level.