Increasing “G-fees” will increase borrowing costs

The Federal Housing Finance Agency (FHFA) has again increased the guarantee fee they charge to lenders delivering loans to Fannie Mae and Freddie Mac.  This will increase the cost of borrowing – by approximately .125% in rate.   

The guarantee fee or “g-fee” is an amount charged by mortgage-backed securities (MBS) providers, like Freddie Mac and Fannie Mae, to help protect against credit-related losses in the overall mortgage portfolio. In other words, it acts a lot like insurance and helps lower the overall risk.  This means home loans can be offered at favorable interest rates to borrowers that have good, but not perfect, credit.