Interest fee

Unfavorable market fees fueled g-fee’s profitability in 2021

Fannie Mae and Freddie Mac bought a record $2.52 trillion in single-family loans in 2021, with the average guarantee fee – meant to cover loan losses, administrative fees and cost of capital – rising 2 basis points from the previous year to reach 56 basis points.

This rise is largely due to the controversial 50 basis point “adverse market fee” applied from the end of 2020, which the initiators railed against and was finally dropped in July 2021.

According to Federal Housing Finance Agencyannual guarantee fee report, the average initial g-fee in 2021 increased by 2 basis points to 13 basis points. Meanwhile, the average ongoing overhead, which is factored into each loan’s interest rate and collected monthly over the life of a loan, remained unchanged at 43 basis points.

According to the regulator’s annual report, average fees on term refinances increased by 3 basis points to 52 basis points, and average fees for purchase loans decreased by 1 basis point to 55 basis points. base.

Among GSE acquisitions in 2021, 35% were purchases of real estate loans, 41% were refinancings
mortgages issued to secure new interest rates or loan terms, and 24% were refinanced
mortgages for which cash has been drawn.

FHFA found that profitability increased for all products, but especially for 15-year fixed rate loans due to higher fees.

Collateral fees increased the most for low-LTV loans “due to the high prevalence of term refinances in low-LTV loans,” the FHFA said in its report.

In 2021, 75% of warranty fees came from large sellers, and only 1% came from small sellers. In 2020, 73% of g-fees came from big sellers.

When Fannie and Freddie first announced the fees in August 2020, lenders only received three weeks’ notice. After a major industry pushback, the implementation was pushed back to December 1, 2020. The 50 basis point fee eventually netted agencies $5.3 billion.