Elevated guarantee fees could be around for another decade.

The Senate is banking on extending mortgage fees that Fannie Mae and Freddie Mac indirectly charge to consumers to help pay for traditional infrastructure. According to legislative text publicly shared by the U.S. Senate, renewing the guarantee fees through 2032 would result in $21 billion toward the $579 billion plan to repair roads, expand rural broadband and modernize the power grid. Congress tacked on an additional 10 basis points in g-fees in 2011 to pay for a three-month payroll tax cut. That increase would have expired this year in September. Instead, the infrastructure package contains language to change the expiration year from 2021 to 2032. That means the elevated guarantee fees would be around for another decade, depending on when the increase would take effect. Freddie Mac and Fannie Mae charge g-fees to lenders to cover credit losses from borrower defaults, administrative costs and a return on capital. In 2019, g-fees amounted to 58 basis points on average for a 30-year fixed rate loan. Those increases are passed on to borrowers in the form of a higher interest rate. Lenders typically pass on the extra cost to borrowers, according to a spokesperson from the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac. The person would not say just how much of the g-fee is paid by the lender versus the borrower. Recently, affordable housing advocates and industry stakeholders alike decried the use of guarantee fees to pay for the bipartisan infrastructure package, which does not have a housing component.

Source: HousingWire