“G-fees” isn’t a term you hear around the water cooler, but it is a term describing a Federal Housing Finance Agency program whose implementation affects how much you pay in mortgage loan costs.
“G-fees” stands for guarantee fee adjustments.
The fees are charged to lenders to cover government-sponsored enterprise (GSE) operational costs related to the guarantee of timely payments on mortgage loans, capital buffers, and administrative costs. They are, of course, passed on to the consumer.
For the average single family home purchase transaction, G-fees more than doubled from 2009 to 2013, increasing the cost of every home mortgage loan.
Consumers pay these G-fees in two ways – up front at closing and as an ongoing fee built into their interest rate.
The Federal Housing Finance Agency spokesperson Ross Cameron, stated that they’re reducing these fees partially through removal of the upfront adverse marketing conditions fee (AMDC). This was a fee imposed in 2008 in response to the unpredictable and volatile housing market. It was scheduled to eventually be removed in all but states with lengthier foreclosure timelines (New York, New Jersey, Connecticut, and Florida), but now will be removed in all states.
The agency will also be adjusting some upfront fees that are determined by the amount of risk based on product type, loan-to-value ratios, and credit scores. The overall effect will be to reduce loan costs for those on the lower end of the credit spectrum – while raising costs for investor purchases and high dollar loans as an offset.
While this change was announced on April 17, 2015, it will not become effective until September 1. Thus, it will have no impact on the summer housing market. For more detailed information, visit the Fannie Mae and Freddie Mac websites.
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