Fannie Mae and Freddie Mac will raise their single-family-mortgage guarantee fees by an average of 10 basis points — aka, 1/10 of a percent — by the end of the year. So called g-fees are essentially insurance against borrower defaults. (For comparison’s sake, F&F raised their g-fees by 26 basis points in 2010 and 28 basis points in 2011.)
Two reasons for the raise: First, to increase the cost of GSE loans closer to that of private ones, hopefully encouraging lenders to enter the market. Second, to help pay for tax cuts — essentially raising a fee to lower a tax.
Lawmakers voted last year to raise g-fees in order to pay for a previous round of tax cuts. The Congressional Budget Office estimated at the time the increases would bring in $3.3 billion and $4.6 billion in revenue lost from the tax cuts per year.
Lenders pass these costs to the homebuyer, meaning taxpayers are essentially paying for their own tax cuts.
And, it reports, the fee increases may not be over, as Congress looks for ways to raise money as it approaches the “fiscal cliff” it created for itself, which will trigger higher taxes and lower spending in January. (Fun with synonyms: Because they’re called “fees,” lawmakers can increase what F&F charge while still claiming they didn’t raise “taxes.”)