Mel Watt wastes little time putting his stamp on housing policy, saying he will delay the increase in mortgage fees announced earlier this month by the FHFA - the regulatory agency overseeing Fannie Mae (FNMA) and Freddie Mac (FMCC). Watt was confirmed to lead the FHFA on December 10 and is set to be sworn in on January 6.
The move to boost fees - which would have led to significantly higher rates and/or points to those with anything but perfect credit and 20% to put down - was part of a plan by outgoing chief Ed DeMarco to allow room for money from private investors into the mortgage market. Needless to say, it had come under strong attack from those whose bread is buttered by the current regime. "The timing of it is impeccably bad," said Lew Ranieri. "All this will do is tighten credit. You're just making housing less affordable."
"What our industry keeps pushing for is let's do things at a slow pace to make sure there's not some unintended consequence," said KB Home (KBH) CEO Jeff Mezger on the company's earnings call (transcript) this week (before Watt nixed the fee increase). "If you're a 750 FICO, this [extra fee] is 1/8 of a percentage point, so it's not a big deal. You get down to a 650 or a 670 or 680 - which historically is a good buyer - and your interest rate could go up 1%."
"There's a new head of FHFA coming in," continued Mezger. "They'll have the ability to go adjust and monitor things." Indeed.