​Section 1601 of the Housing and Economic Recovery Act of 2008 (HERA) requires the Federal Housing Finance Agency (FHFA) to conduct an ongoing study of the guarantee fees charged by Fannie Mae and Freddie Mac (the Enterprises) and to submit a report to Congress each year.   The report is required to contain an analysis of the average guarantee fee and a breakdown by product type, risk class, and volume of a lender’s business.  The report also must analyze the costs of providing the guarantee and provide a comparison to the prior year.  FHFA issued the first single-family guarantee fee report in 2009. 

This report discusses the guarantee fees charged in 2017 and provides a five-year perspective with data back to 2013.  The major findings in this report are:

• For all loan products combined, the average single-family guarantee fee in 2017 remained unchanged from last year’s fee of 56 basis points.  The upfront portion of the guarantee fee, which is based on the credit risk attributes (e.g., loan purpose, loan-to-value ratio, and credit score), fell 1 basis point to 15 basis points.  The ongoing portion of the guarantee fee, which is based on the product type (fixed-rate or ARM, and loan term) increased 1 basis point to 41 basis points.
• The average guarantee fee in 2017 on 30-year fixed rate loans fell by 1 basis point to 59 basis points, while the fee on 15-year fixed rate loans increased by 1 basis point to 38 basis points. The fee on adjustable-rate mortgage (ARM) loans fell 1 basis point to 58 basis points.
• Higher interest rates in 2017 led to a smaller share of both rate-term refinances and 15-year loans acquired by the Enterprises.  The larger share of purchase loans and a growing focus on pilot programs for first-time homebuyers and affordable housing led to a slight increase in the share of loans with higher loan-to-value (LTV) ratios and lower credit scores.
• In 2017, the Enterprises began using FHFA’s Conservatorship Capital Framework (CCF) to calculate the cost of holding capital.  The overall expected profitability of the loan acquisitions was nearly unchanged and in-line with the targeted level.  The Enterprises measure expected profitability as the difference between the total charged guarantee fee and estimated costs, including a targeted return on the capital requirement calculated for these loans.
  

Questions and comments about this report may be addressed to FHFA at: https://www.fhfa.gov/AboutUs/Contact/Pages/General-Questions-and-Comments.aspx.

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