Fannie Mae and Freddie Mac Guarantee Fees
Fannie Mae and Freddie Mac buy single-family mortgages from mortgage companies, commercial banks, credit unions, and other financial institutions. In most cases, a lender receives mortgage-backed securities (MBS) in exchange for the loans.
Fannie Mae and Freddie Macguarantee the payment of principal and interest ontheir MBS and charges a fee for providing that guarantee. The guarantee fee (g-fee), covers projected credit losses from borrower defaults over the life of the loans, administrative costs, and a return on capital.
Lender Fees
Lender guarantee fee payments generally take the form of ongoing monthly payments and frequently also include an upfront payment at the time of Enterprise loan acquisition. A lender typically passes through to the borrower the cost of an upfront fee in the form of a slightly higher interest rate on the mortgage, since borrowers tend to choose not to pay points. Ongoing fees are also included in the interest rate charged to the borrower.
NoDifference toBorrowers
Therefore, as a practical matter, whetherFannie Mae or Freddie Maccharge guarantee fees to lenders as ongoing fees or upfront fees typically makes no difference to borrowers.
Guarantee Fees Studies
Section 1601 of the Housing and Economic Recovery Act of 2008 (HERA) requiresus to conduct an ongoing study of the guarantee fees charged by Fannie Mae and Freddie Mac and to submit annual reports to Congress, based on aggregated data collected from the Enterprises, regarding the amount of such fees and the criteria used by the Enterprises to determine them.
Guarantee Fee Increases
In December 2011, Congress directed FHFA in the Temporary Payroll Tax Cut Continuation Act of 2011 to increase the guarantee feesFannie Mae and Freddie Maccharge lenders on single-family mortgages by at least an average of 10 basis points.
To fulfill that mandate,FHFA directedFannie Mae and Freddie Macto raise guarantee fees by 10 basis points beginning in April 2012. Unlike other single-family guarantee fees, which are retained by Fannie Mae and Freddie Mac, the proceeds from this fee increase are remitted to the Treasury at the end of each quarter.
In August 2012,FHFA directedFannie Mae and Freddie Macto make more changes to the single-family guarantee fees they charge lenders. The changes became fully effective in December 2012, andFannie Mae and Freddie Mackeep the resulting revenues.
The changes:
Increased guarantee fees on single-family mortgages by an additional 10 basis points on average.
Made the guarantee fees the Enterprises charge lenders that deliver small and large volumes of loans more uniform.
Began to address the issue of lower-risk loans subsidizing the pricing of higher-risk loans.
State-Level Guarantee Fee Proposal
In September 2012, we solicited public input via aFederal Registernotice on September 25, 2012on a proposal to impose an up-front fee on newly acquired single-family mortgages originated in specific states where Fannie Mae and Freddie Macare likely to incur default-related losses much higher than the national average because of the individual laws in those states.
FHFA received more than 60 responsesfrom state and local government officials, interest groups, academics, and the public.
FHFAevaluatedpublic input and determined notto proceed with this initiative at this time.
Read the latest reports:Single Family Guarantee Fee ReportsandState-Level Guarantee Fee Analysis.
FHFA Request for Input
On December 9, 2013, the Federal Housing Finance Agency (FHFA) announced proposed increases to guarantee fees (g-fees) that Fannie Mae and Freddie Mac (the Enterprises) charge lenders. The Enterprises receive these fees in return for providing a credit guarantee to ensure the timely payment of principal and interest to investors in Mortgage Backed Securities (MBS) if the borrower fails to pay. The MBS, in turn, are backed by mortgages that lenders sell to the Enterprises.
The proposed changesincluded an across-the-board 10 basis point increase, an adjustment of up-front fees charged to borrowers in different risk categoriesand elimination of the 25 basis point Adverse Market Charge for all but four states. On January 8, 2014, Director Melvin L. Watt suspended implementation of these changes pending further review. As part of that review, FHFA solicitedinput on guaranteefees. Deadline for input closedSeptember 8, 2014.
- Link to news release announcing the Request for Input(6/5/2014)
- Link to the Request for Input
- Link to View Input Received [selectGuarantee Feesin pull down at top of page] -submission period now closed
- Link to news release extending deadline for input(7/29/2014)
Guarantee Fee Review
The Federal Housing Finance Agency (FHFA) has completed a comprehensive review of the agency’s policy for guarantee fees charged by Fannie Mae and Freddie Mac (the Enterprises). FHFA’s review considered multiple factors, including responses to the agency’s June 2014 request for public input, analyses by housing finance market participants of the implied guarantee fee pricing from the Enterprises’ credit risk transfers, and internal analyses of Enterprise pricing, credit guarantee loss data, and modeling.
FHFA’s review focused on reaching an appropriate balance between FHFA’s statutory obligations to: 1) ensure the safety and soundness of the Enterprises, and 2) foster a liquid national housing finance market. In light of this balance, FHFA determined, based on both internal and external analysis, that the current average level of guarantee fees appropriately reflects the current costs and risks associated with providing the Enterprises’ credit guarantee.
As a result, FHFA finds no compelling economic reason to change the general level of fees. FHFA, however, is making certain minor and targeted fee adjustments. To implement these decisions, the agency is directing the Enterprises to make changes to their guarantee fees that will slightly reduce, maintain, or increase costs for different categories of loans. Since all of the guarantee fee changes are small, the agency does not expect the adjustments to cause any material changes to the Enterprises’ loan volume in any of the loan categories and expects the small changes to be revenue neutral.
- FHFA NEWS RELEASE: FHFA CompletesGuaranteeFee Review(4/17/2015)
- FHFA FACT SHEET: ResultsofFannieMaeandFreddieMacGuaranteeFeeReview(4/17/2015)
Guarantee FeeActivities
Fannie Mae and Freddie Mac Single-Family Guarantee Fees in 2022 (5/2/2024)
Fannie Mae and Freddie Mac Single-Family Guarantee Fees in 2021 (11/16/2022)
Fannie Mae and Freddie Mac Single-Family Guarantee Fees in 2020 (12/21/2021)
Fannie Mae and Freddie Mac Single-Family Guarantee Fees in 2019(12/14/2020)
Fannie Mae and Freddie Mac Single-Family Guarantee Fees in 2018(12/18/2019)
Fannie Mae and Freddie Mac Single-Family Guarantee Fees in 2017(12/10/2018)
FHFA Issues 2016 Report to Congress on Guarantee Fees(10/17/2017)
Fannie Mae and Freddie Mac Single-Family Guarantee Fees in 2016(10/17/2017)
Date last updated: 5/2/2024
