Heeding input from numerous lenders, the Federal Housing Finance Agency (FHFA) has announced that Fannie Mae and Freddie Mac will provide the market with more advance notice of increases to their guarantee fee, or g-fee.
Specifically, for loans delivered through the mortgage-backed security (MBS) swap channel, Fannie and Freddie will give advance notice of 60 days for any increases to their base g-fee that are greater than 1 basis point.
Announcing the change, Naa Awaa Tagoe, deputy director of the FHFA, told a crowd at the 2024 Mortgage Bankers Association (MBA) Annual Convention and Expo that it was important for the agency to both listen to market feedback and stay agile when it comes to pricing policies.
“Through engagement with lenders, FHFA and the [government-sponsored enterprises] have received feedback that changes to g-fees sometimes occur without sufficient notice to avoid significantly impacting loan pipelines,” Tagoe said. “FHFA takes these concerns seriously, and that is why we provided ample time for implementation of changes to the upfront g-fee framework in 2022 and 2023.
“However,” she continued, “pricing is also a key tool for the enterprises to manage a series of objectives, including risk management, mission achievement, return thresholds, and product mix. Pricing is also influenced by market factors outside of the enterprises’ control, such as changes in interest rates and loan volumes. Because of this, pricing must be dynamic, and the enterprises need to remain nimble.”
The new policy should successfully provide lenders some more certainty when pricing loans and still let Fannie and Freddie respond to market shifts with adequate speed, said Tagoe.
Bob Broeksmit, president and CEO of the MBA, agreed.
“A 60-day advance notice for some guarantee-fee increases is a response to our concerns and is a welcome development that will allow lenders to better manage their pricing strategies and loan pipelines,” he said. “We have long called for increased pricing transparency and believe more conversations are needed to better balance who bears the risks of pricing volatility between the primary market and the GSEs.”
