Five states may be subject to increased guarantee fees

In an effort to alter the roles Fannie Mae and Freddie Mac play in the mortgage market, the agency which oversees lending activity at the companies recently announced a proposed change to guarantee fees at the state level.

The Federal Housing Finance Agency said mortgages originated in five certain states will now face additional guarantee fees of between 15 and 30 basis points. Lenders in Connecticut, Florida, Illinois, New Jersey and New York will face these fees in a one-time upfront transaction.

This change is an attempt to make the acquisition of mortgages from these states a worthwhile investment for Fannie and Freddie by compensating for certain levels of risk involved. 

"The methodology used by the agency to develop the planned approach addresses only differences in the expected cost of defaults associated with single-family mortgages that will be acquired by the Enterprises in the future and are underwritten according to current standards"the FHFA said.

Meanwhile, lenders in these states will have the option to pass the additional fees on to borrowers. To demonstrate the extra cost, the FHFA said the additional upfront fee on a 30-year FRM for $200,000 would add between $3.50 and $7.00 to a monthly mortgage payment.

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