May 2, 2023
Understanding Fannie Mae and Freddie Mac Mortgage Fee Increases
If you’re in the market for a new home or a mortgage refinance, you may have heard about the recent fee increase from Fannie Mae and Freddie Mac. Starting May 1st, 2023, these two government-sponsored enterprises will raise fees on most conventional mortgages to help build up their capital reserves. This blog post will explain why this increase is happening and what it means for you as a borrower.
What are Fannie Mae and Freddie Mac?
First, let’s define what Fannie Mae and Freddie Mac are. These government-sponsored enterprises were created to provide liquidity to the mortgage market. They buy mortgages from lenders and package them into securities sold to investors, which helps to ensure that lenders have a steady supply of funds to lend to homebuyers.
What is the FHFA?
The Federal Housing Finance Agency (FHFA) is the regulator of Fannie Mae and Freddie Mac. It ensures these two enterprises operate safely and soundly and serve the public interest. The FHFA was created in response to the housing crisis of 2008, which highlighted the need for better oversight of the mortgage market.
Why is there an increase in fees?
The FHFA has required Fannie Mae and Freddie Mac to build up a capital reserve of $300 billion. This increase in capital is intended to protect Fannie Mae and Freddie Mac from financial losses in the event of another housing crisis. The fee increase is necessary to generate the additional income needed to build up the capital reserve.
How will this affect borrowers?
The fee increase will affect most conventional mortgages but not first-time homebuyers with qualifying income or mortgages backed by the VA, USDA, or FHA. According to estimates, the fee increase is expected to add an average of $1,700 to the cost of a $300,000 mortgage. This means borrowers must pay more upfront when they close their mortgage.
Is the increase fair?
Some critics have argued that the increase is unfair to borrowers with good credit, as they will pay more fees than borrowers with bad credit. However, supporters of the increase argue that ensuring the housing market’s stability is necessary. In addition, the cost increase will help protect Fannie Mae and Freddie Mac from financial losses, ultimately benefiting all borrowers.
What can you do as a borrower?
You must know the fee increase if you’re in the market for a new home or a mortgage refinance. You can use online mortgage calculators to estimate how much the addition will add to your monthly payments. You can also shop for the best mortgage rates and fees from different lenders. Additionally, you can consider government-backed mortgages, such as those backed by the VA, USDA, or FHA, unaffected by the increase.
Conclusion
The fee increase from Fannie Mae and Freddie Mac aims to ensure the housing market’s stability. While it may add some upfront costs for borrowers, it will ultimately benefit all borrowers by protecting Fannie Mae and Freddie Mac from financial losses. As a borrower, it’s essential to be aware of the increase in fees and to shop around for the best mortgage rates and fees from different lenders.
If you’re in the market for a new home or a mortgage refinance in the Twin Cities area, visit TWINCITIES.REALESTATE to connect with a knowledgeable, experienced real estate agent. Our team can help you navigate the current mortgage landscape and find the best mortgage rates and fees for your needs. Contact Us today to get started.
Jerry Arguello
612-250-6287
