The Federal Housing Finance Agency announced Friday that it has instructed Fannie Mae and Freddie Mac to raise the fees they charge lenders on loan guarantees in hopes of creating more private-sector competition in the secondary loan market.

The 10-basis-point hike would increase the average guarantee to 38 basis points, a level at which the FHFA's Acting Director Edward J. DeMarco believes would encourage more private firms to buy mortgage loans from banks and other originators. Private investors have largely withdrawn from the market because they cannot compete with low fees Fannie and Freddie charge for taking on the risk of a loan defaulting.

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