U.S. housing regulator signals guarantee fee decision this quarter
Jan 28, 2015 06:06 AM EST
The top U.S. housing regulator on Tuesday said his agency would make a decision by the end of this quarter on fees Fannie Mae and Freddie Mac charge lenders for guaranteeing mortgages.
The mortgage industry has been awaiting a final decision by Federal Housing Finance Agency Director Mel Watt. Lenders usually pass on guarantee fees to borrowers by raising the overall cost of mortgage products.
Speaking before his former colleagues on the House of Representatives Financial Services Committee, Watt gave no indication of what the decision would be.
Watt suspended his predecessor's plans to raise guarantee fees when he became FHFA director a year ago, saying more study was needed.
Fannie and Freddie buy mortgage loans from lenders, repackage them into securities and sell them to investors with a taxpayer guarantee. They backed more than half of all U.S. mortgages in the third quarter of 2014, according to data from Inside Mortgage Finance.
Also on Tuesday, Watt defended instructing Fannie and Freddie to pay into an affordable housing fund. This drew ire from Republicans, who control Congress.
Republican Texas Representative Jeb Hensarling, chairman of the House committee, accused the FHFA of "siphoning off taxpayer funds ... in order to begin filling government housing slush funds."
Last December, the FHFA ordered the housing finance giants to begin setting aside money for the National Housing Trust Fund and Capital Magnet Fund, to be disbursed in 2016.
It came just days after Watt compelled Fannie and Freddie, which were bailed out by taxpayers and put under U.S. government control after they collapsed in 2008, to allow home buyers to purchase a mortgage with a down payment as low as 3 percent of a property's value.
Republican Representative Ed Royce of California said he planned to reintroduce a bill later on Tuesday that would prohibit the mortgage giants from contributing to the affordable housing fund.
Watt also said the FHFA would work "aggressively" on alternate credit score models, a goal he had already mentioned for this year.
"We are trying to figure out how we can do this," Watt said, "but do it in a reliable way and in a way that operationally doesn't create angst in the entire market."