In a long awaited speech this morning, new FHFA Director Mel Watt laid out several changes in the direction for Fannie Mae and Freddie Mac from that proposed by former Acting Director Edward DeMarco. The most significant of which deals with loan limits. Watt will not force the Agencies to reduce their current loans limits, as DeMarco had planned. In addition, Watt proposed a renewed focus on expanding credit availability, loosening rules requiring loan buy-backs, and said he will seek public input before any increase in guaranty fees.
Over the weekend, incoming FHFA Director Mel Watt stated that as soon as he is sworn in, he intends to delay the implementation of the loan-fee increases as were recently announced by outgoing Director Edward DeMarco. It is believed that the delay will cover increases to both the guaranty fee and the loan level price adjustments. It was not clear if Watt’s announcement meant he will also delay DeMarco’s planned elimination of the .25% Adverse Market Delivery Charge (for all but four states). Watt said he needs time to “evaluate fully the rationale for the plan".
FHFA Acting Director DeMarco announced yesterday an increase in the ongoing guaranty fee (g-fee) of 10 basis points on all loans sold to Fannie and Freddie beginning March 1, 2014 and for all loans guaranteed in mortgage-backed securities with settlements on or after April 1, 2014. In addition, he announced the end of the 25 basis point one-time up-front adverse market fee for all states except New York, New Jersey, Connecticut, and Florida (high cost foreclosure states). This fee has been in effect since 2008. This too will be effective on March 1 and April 1 as described above. There also will be changes to the up-front risk based pricing grid. Mel Watt is expected to be confirmed soon as the new FHFA Director, and he will have the discretion to alter these policies.