by Dan Wolf
on Friday, January 24th, 2014 at 8:36am.
Housing experts have been predicting that borrowers will have to pay more for mortgages in 2014. This is partly due to fees ordered by the Federal Housing Finance Agency (FHFA) that would affect all loans backed by Freddie Mac and Fannie Mae. However, incoming FHFA Chief Mel Watt announced that he will postpone, and maybe even cancel, the fees that were supposed to start April 1.
Why it Matters?
If the fees are allowed to be implemented, the cost of borrowing money would drastically increase. Borrowers would have to pay the additional fee up-front or roll it into their interest rate, effectively raising their monthly mortgage payment. The exact amount depends on a lot of variables, including the amount of the loan and the borrower's credit. However, experts estimate the fees could add thousands to the cost of a mortgage or raise monthly mortgage payments by a quarter percent. The fees are likely to affect borrowers with less than perfect credit the most.
What Happens Next?
Mel Watt officially took office on January 6. He has stated he intends to "evaluate fully the rationale" for implementing the fees, their impact on the availability of credit and the effect on Fannie Mae and Freddie Mac, which are both overseen by the FHFA.
The purpose of the fees was to add additional protection for banks from risky borrowers that might default. However, the facts show that defaults are down. In fact, they are lower than before the housing crisis. Since defaults are down, Fannie Mae and Freddie Mac are not hurting financially. Reports show they have almost paid back all of the $187 billion they received during the bailout. Thus, experts agree the fees are just not needed and will be an extra burden on home buyers.
We are still likely to see an increase in the cost of mortgages due to the Federal Reserve cutting back on its purchase of mortgage backed securities. However, a reversal of the FHFA fees will help keep costs down somewhat. Wolf Real Estate Professionals is made up of a team of agents dedicated to customer service. Let us help you find the perfect home, negotiate the right price and close on your property. Contact us to set up an appointment.