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Is a Cut in Fannie/Freddie Guaranty Fees in

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navycmdr Member Level  Tuesday, 11/24/15 01:28:31 PM
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Is a Cut in Fannie/Freddie Guaranty Fees in the Cards for 2016 ?

By Brandon Ivey bivey@imfpubs.com

A number of factors could prompt the Federal Housing Finance Agency to reduce the guaranty fees charged by the government-sponsored enterprises in 2016, according to Barclays Capital analysts.

There is an economic argument as well as a policy argument to be made for reducing g-fees, especially given a greater focus on credit availability and less focus on shrinking the GSEs footprint, Barclays said in a recent report. A g-fee cut could be one of the policy developments announced early next year.

The analysts noted that Fannie Mae and Freddie Mac have earned strong profits on their guaranty business due to the higher g-fees charged between 2009 and 2014. Lenders focus on loans with low loan-to-value ratios and high credit scores also helps with the GSEs profitability.

Lower LTV ratio and higher FICO loans earn positive fee gaps, indicating that returns on these loans are in excess of the GSEs targets, Barclays noted.

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