The Federal Housing Finance Agency has ordered Fannie Mae and Freddie Mac to raise the fees they charge for loans to borrowers who do not contribute at least 20 percent to the down payment or who do not have credit scores in the range of 680 to 760. These fees normally are passed down to the borrowers, who end up paying higher mortgage rates. In this case,
Fannie and Freddie estimate that a borrower with solid credit who puts 10 percent down would pay fees equivalent to 2 percent of the loan amount -- up from 0.75 percent currently -- which in turn could boost the mortgage rate by 0.4 percentage points. While the increase is meant to make the playing field more competitive for private firms, new FHFA director Mel Watt is likely to come under pressure from consumer and real estate groups to roll back the changes.
"There will be significant opposition very quickly once people understand what is actually being implemented," predicted Center for Responsible Lending CEO Martin Eakes.