FHFA Wants Guarantee Fees Raised By Fannie Mae and Freddie Mac
The chief regulator who oversees mortgage giants Fannie Mae and Freddie Mac on Monday said that the fees the two entities charge for guaranteeing mortgages are too low. Edward J. DeMarco, acting director of the Federal Housing Finance Agency, said the agencies' pricing for guarantees is "less than one would observe in a purely private, competitive market." DeMarco made the remarks at a meeting of the North Carolina Bankers Association in Raleigh.
"Private firms would likely target a higher rate of return than (Fannie and Freddie), and the market would demand higher levels of capital," DeMarco said. "I would anticipate that the enterprises will continue the gradual process of increasing guarantee fees." Fannie and Freddie charge lenders a fee for providing a guarantee on a loan's principal and interest. The system was put in place to boost lending and homeownership.
Fannie and Freddie were seized by the government three years ago and placed under a conservatorship overseen by the FHFA. Since then, the two entities have been awarded more than $170 billion in federal aid. DeMarco acknowledged that the current housing finance system needs a lot of work, and insisted that progress, while slow, is being made. The FHFA has been under pressure from lawmakers and economists to make mortgages less expensive and easier to obtain in order to provide a boost to the nation's beleaguered housing market.
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