Freddie Mac boosts fees again

NEW YORK (Reuters) - Freddie Mac (FRE.N), the second-largest provider of financing for U.S. residential mortgages, will add fees on riskier mortgages for a third time to cushion itself from the housing slump, Chief Executive Richard Syron said on Thursday.

The new fees include a 0.3 percentage point to lenders on all mortgages with loan-to-value ratios of 80 percent or more and credit scores less than 740. The government-chartered company also placed an additional charge on loans based on the risks they present, Syron said at the Reuters Housing Summit in New York.

"What we've been trying to do is become more risk-based" in pricing for Freddie Mac's guarantee program, he said.

Freddie Mac, which holds a charter from Congress to raise money for home loan lending, is boosting costs to lenders as it prepares for a housing market that it expects will continue to slump through 2008. Rising delinquencies on loans and declining bond values sent credit expenses soaring and led to a $2 billion loss in the third quarter.

Syron told Reuters the rate of decline in home prices that has led to rising defaults may begin to diminish in a little more than a year. But he said higher fees are justified since he still expects another 10 percent to 11 percent decline in home prices from today.

"If you want to have shareholder-owned (government-sponsored enterprises), and shareholders are willing to put out money, you have to give them market return on equity," he said.

The new fee is charged to lenders, who have the discretion of passing it on to borrowers, a spokesman said. If applied to a $250,000 30-year fixed-rate mortgage, monthly payments would rise by $11, he said.

Freddie Mac last year also installed a "market conditioning" fee of 0.25 percentage points that will take effect on March 9. Fannie Mae (FNM.N), the other publicly traded GSE, has also boosted fees.

Under the new risk-based fee schedule, mortgages that present less risk to Freddie Mac will receive a credit, the company said. Mortgages with loan-to-value ratios of 60 percent and less, and credit scores equal to or greater than 700, will receive a 0.25 percentage point credit.

Better mortgages "were subsidizing something with poorer credit on the other end of the scale," Syron said.

(For summit blog: summitnotebook.reuters.com/)

(Editing by Phil Berlowitz)