FHFA is the Federal Housing Finance Agency. They regulate Fannie Mae and Freddie Mac. FHFA just announced another round of Fannie Mae and Freddie Mac guaranty fee increases. These are the fees that Fannie and Freddie charge lenders to guarantee loans. And of course Fannie and Freddie have the backing of the U.S. government. Without this federal backing, Fannie and Freddie would not exist. Or they certainly would not exist in the size and scope they have over decades and decades. The FHFA fee increase to the lenders will average 10 basis points. Of course, this will be passed onto the consumer. To put this into perspective 10 basis points is roughly equivalent to 1/8% in interest rate, not much. But it is an increase nonetheless, and it is a virtual certainty that these fees will increase quite a bit over the next few years.
So the bigger news is that mortgage rates will increase due to continued increases in the guaranty fee, especially since Fannie Mae and Freddie Mac are broke. People expect rates to stay low because of misleading articles by the media and promises by Ben Bernanke that he cannot keep. However, mortgage rates look set to go up due to these continued guaranty fee increases!
Over the last several years there have been numerous guarantee fee increases. These are not talked about much in the media. There was an article recently in Forbes magazine that said without these guarantee fees that interest rates would be almost 1% lower! So for those of you that think interest rates are going to plummet more, the government has other plans via these guaranty fee increases.