Fannie Mae and Freddie Mac will hold guarantee fees for mortgages at existing levels

The US housing finance firms have been asked to improve their structure for guarantee fees. The regulator has directed Fannie Mae and Freddie Mac to take the steps. However, it said that the changes would be 'revenue neutral'.

According to the Federal Housing Finance Agency (FHFA), Fannie and Freddie will cut guarantee fees for some borrowers and increase them for others. Predictably, the regulator is removing a 25-basis-point adverse market fee, which the companies forced on all new borrowers in 2008, when housing prices fell rapidly.

According to Isaac Boltansky, an analyst with Compass Point Research and Trading, removing the adverse market fee is overdue since long. Boltansky added that it is a different housing environment than when it was put into practice. On the whole, FHFA said that consumers should be aware of even little change.

According to FHFA Director Mel Watt, "Our goal is to assure taxpayers, homeowners and industry that we are striving for an appropriate balance between safety and soundness and liquidity in the housing finance market".

According to FHFA, the agency will keep on checking guarantee fees closely and will bring changes if required. FHFA is working again on the loan level price adjustments as part of the changes. The loan level price adjustments are fees based on the loan-to-value ratio of the mortgage and the borrower's credit score.

FHFA said in a press release that FHFA is asking the enterprises to raise the upfront fees by 25-basis points for loans, which have credit score of 700 or more together with a LTV ratio of 80% or less. It said that the agency is leaving the earlier decision to put the geographically-based fees into practice.