Origination News Feature Story

NAMB: Disclose GSE Fees

By Brian Collins

WASHINGTON-The National Association of Mortgage Brokers has developed a good-faith estimate form with a line item to disclose the loan fees brokers are collecting for Fannie Mae and Freddie Mac.

The two government-sponsored enterprises have raised their loan fees over the past 18 months in response to market conditions and rising delinquencies. These fees can add $2,000 to $6,000 to the cost of a mortgage at closing.

The GFE line item refers to the fee as a "GSE adverse credit fee." Brokers jokingly refer to these fees as the GSEs' version of a yield-spread premium. Most of the broker's compensation in a mortgage transaction comes from a YSP.

"We will explain to the consumer, for transparency sake, that these are profits that go to the GSEs and not to the originator," NAMB chief executive officer Roy DeLoach said.

For borrowers who don't have the best credit scores, Fannie and Freddie loan fees can range from 175 basis points to 300 bps. The GSEs charge lenders these delivery fees, which are passed on to borrowers. (100 bps equals 1% of the loan amount.)

"It is not fair to act like it all goes to the originator," Mr. DeLoach said. Brokers shouldn't collect the fees and not tell consumers where they are going, he added.

A Fannie spokeswoman said the fees are "targeted pricing adjustments aimed at aligning price with risk for the highest-risk products in the market today, including interest-only loans, cash-out refinancings, low credit scores, high loan-to-value loans and condos."

A Freddie spokesman said the company would not respond until they see the GFE form.

Meanwhile, the brokers are still stewing over the new appraiser standards that Fannie and Freddie, along with their regulator, have agreed to implement as part of a settlement with New York attorney general Andrew Cuomo.

The new standards ban the GSEs from purchasing loans where a loan officer or a mortgage broker has picked the appraiser. The brokers claim this restriction will place brokers at a severe disadvantage in the marketplace and NAMB is working with the law firm Baker & Hostetler to determine what course of action to take. NAMB "intends to take appropriate legal action if necessary," president Marc Savitt said.

The banking industry and federal banking regulators appear to be willing to accept the new appraisal standards, which go into effect May 1. One trade group executive told ON that many of the largest wholesalers don't allow brokers to handle appraisals. They rely on automated valuation services and appraisal management firms.