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FHFA Raises Fees on High-Balance Second-Home Loans

January 6, 2022

The Federal Housing Finance Agency announced it would be increasing upfront fees on second-home mortgages and on mortgages that finance homes with balances that exceed standard conforming loan limits. The fees are expected to increase the purchase cost of second homes and homes in high-cost areas.

The new fees from Fannie Mae and Freddie Mac will take effect on April 1.

Upfront fees for mortgage loans on second homes will rise between 1.125% and 3.875%. Most buyers finance their fee through their mortgage, which adds from 0.225% to 0.75% to the annual mortgage rate. For other certain high-balance loans sold to Fannie Mae and Freddie Mac, upfront fees will increase between 0.25% and 0.75%, or roughly 0.05% to 0.15% added to the annual mortgage rate, the FHFA said.

“These targeted pricing changes will allow [Fannie Mae and Freddie Mac] to better achieve their mission of facilitating equitable and sustainable access to homeownership while improving their regulatory capital position over time,” Sandra L. Thompson, FHFA acting director, said in a statement.

The National Association of Home Builders said that a buyer of a second home with a $300,000 mortgage loan amount and a loan-to-value ratio of 65%, for example, will pay an additional fee of $4,875 if their mortgage is purchased by Fannie Mae or Freddie Mac. Prior to this change, such buyers would have to pay no additional fee for a comparable mortgage.

“Fannie Mae and Freddie Mac will face greater risks as the market is waned off of the extraordinary federal support during the pandemic, and these changes may help them to support the maximum access and affordability possible for the market in a sound manner,” said NAR President Leslie Rouda Smith. “However, we are concerned that any fee increases that exceed necessary levels in the current environment will harm affordability and access for consumers. REALTORS® believe any excess revenues gleaned from the fee increases must be used to support homeownership opportunities in underserved communities, expanding affordability and access in a safe manner.”

“With the nation in the midst of a housing affordability crisis and many more workers electing to telework, this is exactly the wrong time for federal regulators to be raising fees on homeownership and second homes,” Chuck Fowke, chairman of the NAHB, which has spoken out against the fee increases.

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