Section 1601 of the Housing and Economic Recovery Act of 2008 (HERA) requires the Federal Housing Finance Agency (FHFA) to conduct an ongoing study of the guarantee fees charged by Fannie Mae and Freddie Mac (the Enterprises) and to submit a report to Congress each year. The report is required to contain an analysis of the average guarantee fee and a breakdown by product type, risk class, and size. The report also must analyze the costs of providing the guarantee and provide a comparison to the prior year. FHFA issued the first single-family guarantee fee report in 2009.
This report discusses the guarantee fees charged in 2018 and provides a five-year perspective with data back to 2014. The major findings in this report are:
- For all loan products combined, the average single-family guarantee fee in 2018 increased 2 basis points to 55 basis points. The upfront portion of the guarantee fee, which is based on the credit risk attributes (e.g., loan purpose, loan-to-value ratio, and credit score), was unchanged at 15 basis points. The ongoing portion of the guarantee fee, which is based on the product type (fixed-rate or adjustable-rate, and loan term), increased 2 basis points to 40 basis points.
- The average guarantee fee in 2018 on 30-year fixed rate loans was unchanged at 56 basis points, while the fee on 15-year fixed rate loans increased by 1 basis point to 37 basis points. The fee on adjustable-rate mortgage (ARM) loans fell 4 basis points to 54 basis points.
- Higher interest rates accompanied by increasing house prices in 2018 led to a smaller share of both rate-term refinances and 15-year loans acquired by the Enterprises. The larger share of purchase loans and a growing focus on programs for first-time homebuyers and affordable housing led to a slight increase in the share of loans with higher loan-to-value (LTV) ratios and lower credit scores.
Questions and comments about this report may be addressed to FHFA at: https://www.fhfa.gov/contact/general.