* Halting fee increase is Watt's first policy action
* Planned hike was meant to shrink government housing role
* Watt signals concern on credit availability
By Margaret Chadbourn
WASHINGTON, Jan 8 The U.S. regulator for Fannie
Mae and Freddie Mac on Wednesday instructed
the two taxpayer-owned mortgage finance companies to halt a
planned increase in fees on loans they back, saying it could
Mel Watt, who was sworn in as director of the Federal
Housing Finance Agency on Monday, said he would set aside the
price changes, which were just announced last month, to allow
for further study of the potential impact.
"The implications for mortgage credit availability and how
these changes might interact with the new ... mortgage standards
could be significant," Watt said. "I want to fully understand
these implications before deciding whether to move forward with
Fannie Mae and Freddie Mac were scheduled to increase the
fees they charge lenders for guaranteeing mortgages this year.
The fees often trickle down to borrowers and result in higher
In his fist policy decision as FHFA director, Watt is
signaling that maintaining borrowers' access to mortgage credit
is a high priority. Many consumer and housing industry groups
opposed the original fee increases when Watt's predecessor,
Edward DeMarco, announced them.
They were meant to shrink the government's presence in the
mortgage market by improving the competitiveness of loans that
are not backed by Fannie Mae or Freddie Mac. DeMarco unveiled
them a day ahead of Watt's Senate confirmation vote in December.
The announcement from Watt does not come as a surprise. In
an unusual move, he told reporters last month that he intended
to consider a policy reversal once taking office.
Fannie Mae and Freddie Mac, which back about 60 percent of
U.S. home loans, buy mortgages from lenders and package them
into securities on which they guarantee payments of principal
and interest. In doing so, they serve as major sources of
funding for hundreds of banks.
The FHFA said it would provide at least 120 days notice
after completing the study before making final changes.
The guarantee fees were scheduled to rise an average of 14
basis points on typical 30-year fixed-rate mortgages, the
regulator said when it announced the changes in December.
Pete Mills, senior vice president of residential policy at
the Mortgage Bankers Association, said the fee increases would
have hurt borrowers and were unlikely to accomplish the FHFA's
goal of attracting more private investment in housing.
"These efforts (by the FHFA) to crowd in private capital
haven't been successful to date," Mills said. "Watt has made a
significant policy change."
Used to offset risks, the fees also provide a source of
revenue for Fannie Mae and Freddie Mac. Fannie Mae, for
instance, made $7.6 billion in single-family guarantee-fee
income in 2013, according to its quarterly financial statements.