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 the Enterprises 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 2019 to 2018 and provides statistics back to 2017. Significant findings of the report include:
- For all loan products combined, the average single-family guarantee fee in 2019 increased 1 basis point to 56 basis points. The upfront portion of the guarantee fee, which is based on the credit risk attributes (e.g., loan purpose, loan-to-value (LTV) ratio, and credit score), decreased 2 basis points to 13 basis points. The ongoing portion of the guarantee fee, which is based on the product type (fixed-rate or adjustable-rate, and loan term), increased 3 basis points to 43 basis points.
- The average guarantee fee in 2019 on 30-year fixed rate loans increased 2 basis points to 58 basis points, while the fee on 15-year fixed rate loans decreased by 1 basis point to 36 basis points. The fee on adjustable-rate mortgage (ARM) loans increased 2 basis points to 56 basis points.