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Mel Watt Signals Change, Delays Fannie, Freddie Fee Hike

NEW YORK (TheStreet) -- The Federal Housing Finance Agency has directed bailed-out housing giants Fannie Mae (FNMA) and Freddie Mac (FMCC) to delay the implementation of a recently announced proposal to increase guarantee fees on mortgages they purchase.

In December, the FHFA announced plans to raise the base guarantee fee by 11 basis points on average. The proposal sought to charge a higher fee for states that had a particularly lengthy foreclosure process. It also proposed a higher fee for borrowers with lower credit scores or those who did not have a sufficiently high downpayment.

But the regulator's new director Mel Watt, who was sworn in on Jan. 6, said he intends to conduct a thorough evaluation of the changes and their likely impact, apparently responding to concerns that the fee increases would hurt borrowers.

"The implications for mortgage credit availability and how these changes might interact with the new qualified mortgage standards could be significant," said Watt in a statement. "I want to fully understand these implications before deciding whether to move forward with any adjustments to g-fee pricing."

Must Read: Big Bank Stocks Have Plenty of Upside for 2014, Says Jefferies

Watt had said prior to being sworn in that he would delay the increases. Still, the first move by the new director may be a signal of other policy changes to come. Analysts expect that Watt would do more to support the mortgage industry and improve access to credit and would be less concerned about conserving taxpayer losses than his predecessor Edward DeMarco.

Other proposals such as a plan to lower the size of loans purchased by Fannie and Freddie and reduce the volume of multi-family loans purchases by 10% may also be revisited in the coming months.

-- Written by Shanthi Bharatwaj in New York

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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