On April 17th, the Federal Housing Finance Agency (FHFA) announced that the guarantee fees (g-fees) that Freddie Mac and Fannie Mae charge lenders to insure single-family mortgage loans should generally stay at their same level, but they did make some adjustments to the fees. The FHFA eliminated the “adverse market” fee for new single-family loans, but increased the g-fees for those wanting a Florida mortgage who have a credit score of 700 or more, and whose loans have a loan-to-value (LTV) ratio of 80 percent or less.

The adverse market fee was first adopted by Fannie Mae and Freddie Mac in 2008 due to the rising number of defaulted loans in the housing market. The fee is currently 25 basis points (0.25 percent). In 2013, the FHFA recommended dropping the fee for most states, except for Connecticut, New Jersey, New York, and Florida. Fortunately for Florida home buyers (and those in the other three states), the April 17th announcement reversed that decision, eliminating the fee in all states.

Good news, bad news

The elimination of the adverse market fee is the good news. The bad news is that elimination is going to be offset by an increase of 25 basis points (0.25 percent) in upfront g-fees for more credit-worthy buyers. The FHFA states that targeting this adjustment will allow borrowers who can’t afford a 20 percent down payment to benefit from eliminating the adverse market fee.

The FHFA also has instructed Fannie Mae and Freddie Mac to increase the g-fees for jumbo conforming mortgages (over $417,000 in most areas) by 25 basis points. Finally, the two government-sponsored enterprises will increase the g-fees on some higher-risk loans, including cash-out refinances, loans for investment properties, and loans with simultaneous secondary financing. The increase on loans with simultaneous secondary financing will not affect Fannie Mae’s HFA Preferred loans.

Be prepared

If you’re shopping for a Florida mortgage, these changes may affect your closing costs or other aspects of your financing. If you want to know more about these changes, contact Embrace Home Loans today at 407-733-6425.

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