U.S. Representative Mel Watt, who will leave Congress to become regulator of Fannie Mae and Freddie Mac, said he will delay a planned increase in the fees the U.S.-owned companies charge to guarantee mortgages.
Watt, who is scheduled to be sworn in as director of the Federal Housing Finance Agency on Jan. 6, said in a statement yesterday that he needs time to evaluate fee increases announced this month by Edward J. DeMarco, the agency’s acting chief.
The announcement by Watt follows complaints by mortgage bankers and other housing-industry participants that the higher fees set to take effect in March and April were too steep and sudden. Such increases typically are passed on to borrowers in the form of higher interest rates.
“I felt it was important to announce my intentions now because of the prospect that some lenders could start to price the proposed changes into the market well before the effective dates,” Watt said in an e-mail to reporters.
Watt, a North Carolina Democrat, was confirmed by the Senate as FHFA director on Dec. 10. A day earlier, DeMarco said Fannie Mae and Freddie Mac would raise fees by 10 basis points as part of an effort to shrink their mortgage-market footprint.
The companies, which have been under U.S. conservatorship since 2008, buy loans and package them into securities on which they guarantee payments of principal and interest. They now back about 60 percent of U.S. home mortgages.
DeMarco also said the companies would start charging higher fees in New York, New Jersey, Connecticut and Florida, states where long foreclosure timelines make it more expensive for the government-sponsored enterprises to dispose of properties they take over after borrowers default. He said the companies also would shift their fee structure so borrowers with poor credit would pay more.
Watt said he intends to delay all of those changes until he has time “to evaluate fully the rationale for the plan” and how it would affect the availability of credit and the companies’ risk exposure.
FHFA’s last guarantee-fee increase, of 10 basis points, came in November 2012. An 10-basis-point increase would cost a borrower with a $200,000 loan about $4,000 over a 30-year term.