Fannie, Freddie hiking mortgage loan fees

Buying a home will be more costly next year for many people thanks to planned fee increases.

Fannie Mae and Freddie Mac will hike the guarantee fees on government-backed mortgage loans — fees that typically are passed along to borrowers and will result in higher mortgage rates.

The Federal Housing Finance Agency announced the policy change Dec. 9 as part of an effort to decrease the government-owned mortgage finance companies' presence in the U.S. mortgage market and bring private capital back into the mix.

"Any increased fees impact people's ability to obtain home ownership," said Brenda Clement, executive director of the Citizens' Housing and Planning Association, a nonprofit umbrella group for affordable housing and community development in Massachusetts. "The housing market has come back slowly, particularly for people at the low-income levels, and anything that increases fees or increases the complexity of buying a home is always problematic."

On Monday, Fannie and Freddie, which currently back about two-thirds of new U.S. mortgages, said fees will rise sharply for many borrowers who don't make down payments of at least
20 percent and don't have high enough credit scores — a large share of homebuyers.

The fee increases are especially hard to swallow in Massachusetts, a higher-
value area in terms of real estate and housing costs in general, said Peter Ruffini, incoming president of the Massachusetts Association of Realtors and regional vice president at Jack Conway Realtors in Norwell. "Whenever we hear news like this, oftentimes it impacts us to a greater extent," he said.

Interest rates already are expected to creep into the 
5 percent to 5.5 percent range, absent the fee increases, Ruffini noted. "Things like this affect a first-time homebuyer's ability to get into the market," Ruffini said. "It decreased their purchasing power, and it's tough to get a loan right now anyway."

Making mortgages more expensive, especially while interest rates already are rising, may inhibit the recovery and have unintended consequences, said David Abromowitz, a Boston attorney who specializes in affordable housing. "Raising the guaranty fees now won't make the housing system safer, as lenders are already screening out borrowers without high credit scores and strong, documented income," said Abromowitz, a senior fellow at the Center for American Progress, a progressive Washington, D.C., public policy think tank. "But it will make home-buying more costly, while rents are also shooting up — with the consumer losing out either way."

Herald wire services contributed to this report.

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