Fannie Mae and Freddie Mac’s Higher Fees Keep Rates from Falling

Sept 20th, 2012 (

Mortgage rates reached new lows this week after the Federal Reserve started its bond-buying program. But they could have dropped lower if Fannie Mae and Freddie Mac had not raised mortgage fees.

The decline in rates was expected after the Fed said last week that it would spend $40 billion per month to buy mortgage bonds. But the move didn't push rates as low as it could have.

One reason rates have not tumbled is that the Fed's move coincided with the implementation of higher mortgage fees. On Nov. 1, Fannie Mae and Freddie Mac will increase the fees they charge lenders to guarantee loans. Lenders have already started to price their loans based on the higher fees because it can take several weeks before they close and sell the loans to Fannie and Freddie.

The fee hike is being passed on to consumers and translates into about a quarter of a percentage point increase in the rate borrowers get, says Greg Sinnott, director of secondary financing at CMG Mortgage.

"I personally find it a bit ironic that Fannie Mae and Freddie raised their fees, and then the Fed announced QE3 would involve directly buying (mortgage-backed securities), which dropped rates by roughly the same amount," he says.

The 30-year fixed should have been closer to 3.5 percent, based on how much the yields on mortgage bonds have dropped since QE3 was announced.


Sept 20th, 2012 (

 30-year Conventional:         

3.70% -- with avg. points: 0.43 pts

 15-year Conventional:

2.95% -- with avg. points: 0.43 pts                                                                                        

 30-year FHA:          

3.52% -- with avg. points: 0.43 pts

 5-year Conventional ARM:           

2.69% -- with avg. points: 0.43 pts


30 Year Fixed Trend Over Last 3 Months



 Date           Conventional            FHA                VA          

09/20           Slightly Lower    Slightly Lower    Lower       

      ·             10 Year Treasury Yield opened at 1.74


09/19           Slightly Lower      Lower               Lower       

      ·             10 Year Treasury Yield closed at 1.78


09/18           Unchanged         Unchanged     Unchanged      

      ·             10 Year Treasury Yield closed at 1.81


09/17           Lower                 Unchanged     Unchanged      

      ·             10 Year Treasury Yield closed at 1.84


09/14           Unchanged     Slightly Lower    Slightly Lower      

      ·             10 Year Treasury Yield closed at 1.87


09/14(2)      Higher               Higher                Higher         

      ·             Rate change for the worse


09/13           Lower           Slightly Lower    Slightly Lower      

      ·             10 Year Treasury Yield closed at 1.76


09/13(2)      Lower                   Lower              Lower      

      ·             Rate change for the better!


09/13(3)      Lower                   Lower       Slightly Lower      

      ·             Rate change for the better!



Sept 20th, 2012 (

Will rates rise or remain relatively unchanged this week?

Industry experts and analysts provide their insights.

 ·       39% of respondents expect rates to fall in the coming weeks  

·       15% predict a further increase in mortgage rates while the remaining  

·       46% forecast that mortgage rates will remain more or less unchanged


Competitor Updates

Lender                        30 Year                     15 Year           

Bank of America     3.375% w/ 0.875 pt     2.75% w/ 0.75 pt

Wells Fargo             3.625% w/ 1.00 pt       2.875% w/ 1.00 pt

Citi Mortgage          3.375% w/ 1.125 pt     2.875% w/ 0.125 pt

Chase                     3.625% w/ 0.625 pt      2.875% w/ 0.75 pt                           

*All rates reported from each competitor’s website as of 11:00 am EST today