Jan
9
Written by:
Mortgage Blog
1/9/2012 7:52 AM
It is hard, as things stand now in the United States, not to mix politics and the mortgage industry. Congress agreed to finance a two-month extension of the payroll tax cut and unemployment benefits by raising the guarantee fee that Fannie and Freddie charge loan originators by at least one-tenth of a percentage point. And it is unlikely that mortgage companies will absorb this cost, but instead pass it on to borrowers on new loans. The bill also will raise the annual mortgage insurance (MI) premium borrowers pay on Federal Housing Administration loans by one-tenth of a percent.
This follows another government-directed move in the mortgage market a few months ago when it announced HARP 2.0 that will let deeply underwater homeowners who are current on their payments refinance mortgages owned or guaranteed by Fannie and Freddie at lower rates. Although the plan was rolled out by Fannie and Freddie, actual mortgage lenders may not be able to offer the actual plan, along with its pricing, for a few more months. And borrowers need to remember that although the government may mandate a mortgage plan, it doesn’t necessarily force private mortgage companies to offer the loans.
Even when Fannie and Freddie were private-sector companies (before they were seized by the government in September 2008 and placed in conservatorship) they were political institutions. Over their history Congress has often used them to advance Congress’ goals, such as increased lending to minorities, increased home ownership among U.S. citizens, and offering low down-payment programs to certain segments of the population such as veterans.
But what's different now is that they are being used to pay for programs that have nothing to do with housing. So although the increase in guarantee fee is not a large sum per month, the industry is watching this policy shift very closely.