Consumers can expect to pay more to get a mortgage next year, the result of changes meant to reduce the role that
Fannie Mae
FNMA +2.94%
and
Freddie Mac
FMCC +2.72%
play in the market.
The mortgage
giants said late Monday that, at the direction of their regulator, they
will charge higher fees on loans to borrowers who don't make large down
payments or don't have high credit scores—a group that represents a
large share of home buyers. Such fees are typically passed along to
borrowers, resulting in higher mortgage rates.
Fannie
and Freddie, which currently back about two-thirds of new mortgages,
don't directly make mortgages but instead buy them from lenders. The
changes are aimed at leveling the playing field between the
government-owned companies and private providers of capital, who are
mostly out of the mortgage market now. Fannie and Freddie were bailed
out by the government during the financial crisis but are now highly
profitable.
The Federal Housing Finance
Agency last week signaled the fee increases but didn't provide details.
The agency's move came one day before the Senate voted to confirm Rep.
Mel Watt
(D., N.C.) as its director. It isn't clear whether Mr. Watt, who
hasn't yet been sworn in, weighed in on the changes. An FHFA spokeswoman
declined to comment on any discussions with Mr. Watt, who also declined
to comment.
Mr. Watt will face heavy
pressure by consumer groups and the real-estate industry to reverse
course, industry officials said Tuesday. "There will be significant
opposition very quickly once people understand what is actually being
implemented," said
Martin Eakes,
chief executive of the Center for Responsible Lending in Durham,
N.C., a consumer-advocacy nonprofit.
The
changes take effect in March but will be phased in by lenders earlier.
The fee increases come as the Federal Reserve contemplates an end to its
bond-buying program, which has kept mortgages rates low, and as new
mortgage-lending regulations take effect next month.
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