South Florida Real Estate News

New mortgage borrowers in five U.S. states, including Florida, would pay higher fees for a loan than those in other states in a move opposed by Florida Chief Financial Officer Jeff Atwater, Florida Realtors and the National Association of Realtors® (NAR).

Fannie Mae and Freddie Mac – now under the Federal Housing Finance Authority (FHFA) – have traditionally charged guarantee fees (g-fees) to single-family home borrowers. The fees generally cover credit risks, and they vary based on the type of loan and a specific borrower’s credit risk.

For the first time, however, FHFA plans to increase guarantee fees in only five states – including Florida. According to FHFA, foreclosures cost Fannie Mae and Freddie Mac more in Florida, and to offset that higher cost, they’ll charge new borrowers more for a mortgage. FHFA points to Florida’s longer foreclosure timeline – an average of 660 days – and its court foreclosure system as the cause.

“It’s simple: Florida’s foreclosure process protects homeowners,” says 2012 Florida Realtors President Summer Greene. “However, FHFA seems to think it’s a trade-off. If we want to protect homeowners, we should pay for it – and under this rule, first-time buyers and families would pay for it in the form of higher fees on every Fannie Mae and Freddie Mac mortgage.”

Earlier this week, Atwater wrote a letter to FHFA asking them to withdraw the proposed rule, which would take effect sometime in 2013. He made the following points:

• The guarantee-fee standard isn’t fair. Twenty-six states have “carrying costs” above the national median.

• The suggested 20 basis points guarantee fee increase for Fannie Mae and Freddie Mac’s single-family Florida mortgages would raise the lifetime mortgage cost by potentially thousands of dollars.

• Guarantee fees have already been raised substantially in recent months; on average, guarantee fees increased from 26 basis points nationally in 2010 to 28 basis points in 2011, with another average hike of 10 basis points ordered this year.

• Floridians, along with all U.S. taxpayers, spent nearly $190 billion bailing out Fannie Mae and Freddie Mac. It’s “unconscionable to think that Fannie Mae and Freddie Mac want to take more of taxpayers’ hard-earned dollars through higher fees before resolving more fundamental problems,” Atwater says.

• Currently, Fannie Mae and Freddie Mac service about 1.9 million single-family loans in Florida. Higher guarantee fees would weaken demand and reduce their value when it’s time to sell.

“It is my expectation that the FHFA will address the concerns I have raised and reconsider its short-sighted and financially burdensome proposal in favor of a more comprehensive solution to its financial situation,” Atwater concluded.

A description of the guarantee fee changes impacting Florida is included in the Sept. 25, 2012, Federal Register. A copy is posted online.

In a nutshell...Conventional mortgage rates are moving higher. We have already seen guarantee fees move up this year on Conventional financing and a direct increase in interest rates as a result.

These increases are not a result of market movements or economic data that effects Mortgage Backed Securities (MBS) or Federal Bonds. The increases are a direct impact to borrowers by the FHFA. The g-fees are supposed to help mitigate the risk with compensation, but the increases are also going to have a serious slowing effect to our recovering housing market (both real estate and financing sectors will feel the impact).

Until next time...JJ