UPDATE 2-Fannie Mae, Freddie Mac to hike mortgage fees before yr-end

Fri Aug 31, 2012 4:25pm EDT

WASHINGTON Aug 31 (Reuters) - Fannie Mae and Freddie Mac will raise the fees they charge mortgage lenders by the end of the year, their regulator said on Friday, a step designed to encourage private firms to wade back into the housing finance market.

The so-called guarantee fees that the two government-controlled companies charge lenders to guarantee new loans will increase by an average of 10 basis points, the Federal Housing Finance Agency said in a statement.

Increasing the guarantee fee will ultimately make it more expensive for lenders to use the government-controlled companies to back their loans and give them an incentive to use the financial market instead.

The Obama administration has proposed increasing the fees as a way to reduce the government's role in the housing market, where Fannie Mae and Freddie Mac guarantee the majority of new home loans.

The two companies, which buy mortgages from lenders and repackage them as securities for investors, were taken over by the government in 2008 when their mortgage-related losses threatened the financial system. So far, the companies have drawn a total of $188 billion in taxpayer aid to stay solvent.

"These changes will move Fannie Mae and Freddie Mac pricing closer to the level one might expect to see if mortgage credit risk was borne solely by private capital," said the regulator's acting director Edward DeMarco.

Earlier this year, the companies were required to raise their guarantee fees by 10 basis points to pay for a two-month extension in the payroll tax break.

JPMorgan analysts predicted the latest mortgage fee increase would raise around $25 billion for Fannie Mae and Freddie Mac through 2021.