Freddie Mac said next year it plans to eliminate or lower the up-front fees it charges lenders on the largest loans it guarantees.
In a bulletin to lenders Monday, the McLean, Va., government-sponsored enterprise said it would eliminate up-front fees for fixed-rate homebuyer loans and no-cash-out refinancings with balances above $417,000. It also will lower the fees for some other large loans by 25 basis points, to 50 basis points.
A spokesman for Freddie called the reductions "the most sweeping" since the GSE was put into conservatorship Sept. 6. Last month Freddie and Fannie Mae canceled plans to double the 25-basis-point "adverse market" fees that they had instituted in March to reflect deteriorating conditions.
"Now that they're both in conservatorship, I think they are starting to look at some of the fee changes that have been put into place, which could have the undesirable effect of limiting affordability to some degree," Keith Gumbinger, a vice president at the research firm HSH Associates, said Monday. "Anything that's adding to the expense or burden of obtaining a home loan right now is really not welcome."
A housing law enacted in July raised GSE loan limits in high-cost markets beginning next year. The conforming loan limit for next year will remain $417,000 in most markets, and the limit in high-cost markets will be capped at $625,500.
A temporary increase to $729,750 in high-cost markets created as a part of the stimulus legislation enacted in February will expire at yearend.
Fannie said in May that it would price "jumbo-conforming" loans the same as regular conforming ones this year.
Last quarter Freddie bought $207 million of what it calls "super conforming" loans. In its quarterly filing to the Securities and Exchange Commission this month, it said competition, especially from the Federal Housing Administration, has hindered its purchases of such loans.
The GSEs charge both up-front and monthly fees to guarantee mortgages.
Also Monday, Freddie said that the portfolio of mortgages it owns increased at an annual rate of 43.6%, to $763.7 billion.
The Federal Housing Finance Agency, the GSEs' conservator and regulator, has told them to increase the amount of mortgages they own as a way of increasing market liquidity. But in the SEC filing, Freddie said that a poor market for its debt makes it difficult to do so, and that it is constrained by a provision of its rescue deal with the government that limits how much debt it can take on.