As you may have heard, Mel Watt, the new director of the Federal Housing Finance Agency ("FHFA") testified before the Senate Banking Committee on Wednesday, 20141119. Watt was essentially there to defend the stance taken in January of this year to postpone any increase in the guaranty fees charged by Fannie Mae and Freddie Mac so the FHFA could study and analyze the situation more thoroughly. Watt did indicate that guidelines for increased fees would be rolled out during the first quarter of 2015.
Watt was criticized by Republicans for delaying the fee increase and for 
considering the return of the 3% down payment mortgage. (For more on the 3% down payment mortgage plan, see my previous blog.) Watt expects to roll out guidelines for the 3% down payment mortgage program next month. It does appear that the 3% down payment program will become a reality and a number of small lenders around the country are already doing 3% down payment loans and holding them in their own portfolios.
The Democrats, not to be outdone, criticized Watt for not taking action to reduce the principal amount of mortgages that are outstanding with troubled borrowers. Watt replied with a statement that basically was a put-off - that the Agency was still studying the matter.
There was apparently about the conservatorship of Fannie and Freddie during 2014. It would be great to get the government out of the mortgage guarantee business. As indicated previously however, that may well not happen soon as the GSEs are now starting to make money. We can only hope that they do not price themselves out of the market, similar to the FHA increase in mortgage premiums collected by that agency. Those exorbitant fees for mortgage insurance by FHA have ruined an otherwise useful loan program and put it beyond the reach of a lot of first time buyers. We should encourage our Congressional representative to monitor this situation and act to avoid excessive increases by Fannie and Freddie that will stifle any growth in the housing market.
A more detailed report of the Committee meeting appears at reuters.com
Image courtesy of businessweek.com
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