According to report from the Wall Street Journal,the mortgage giants Fannie Mae and Freddy Mac, said late Monday that, at the direction of their regulator, they will charge higher fees on loans to borrowers who don't make large down payments or don't have high credit scores—a group that represents a large share of home buyers. Such fees are typically passed along to borrowers, resulting in higher mortgage rates.
Fannie and Freddie, which currently back about two-thirds of new mortgages, don't directly make mortgages but instead buy them from lenders. The changes are aimed at leveling the playing field between the government-owned companies and private providers of capital, who are mostly out of the mortgage market now. Fannie and Freddie were bailed out by the government during the financial crisis but are now highly profitable.
The Federal Housing Finance Agency last week signaled the fee increases but didn't provide details. The agency's move came one day before the Senate voted to confirm Rep. Mel Watt (D., N.C.) as its director. It isn't clear whether Mr. Watt, who hasn't yet been sworn in, weighed in on the changes. An FHFA spokeswoman declined to comment on any discussions with Mr. Watt, who also declined to comment.
Mr. Watt will face heavy pressure by consumer groups and the real-estate industry to reverse course, industry officials said Tuesday. "There will be significant opposition very quickly once people understand what is actually being implemented," said Martin Eakes, chief executive of the Center for Responsible Lending in Durham, N.C., a consumer-advocacy nonprofit.
The changes take effect in March but will be phased in by lenders earlier.
