The Federal Housing Finance Agency (FHFA) released its annual report on single-family guarantee fees charged by Fannie Mae and Freddie Mac (the Enterprises). The report compares 2020 statistics with 2019.

Guarantee fees are intended to cover the credit risk and other administrative and operational costs the Enterprises incur when they acquire single-family loans from sellers, the agency stated.

The fees are recouped in two ways: a seller may exchange or swap a group of loans for a Fannie Mae or Freddie Mac guaranteed mortgage-backed security (MBS) collateralized by these loans, which the seller can then sell into the secondary market (an MBS swap); or a seller may deliver loans to an Enterprise in return for a cash payment and the Enterprises bundle the loans into MBS and sell the MBS into the secondary market (a cash window acquisition).

Generally, larger sellers tend to use an MBS swap, while smaller lenders opt for cash window acquisitions.

The major findings in this report include:

• For all loan products combined, the average single-family guarantee fee decreased 2 basis points to 54 basis points in 2020.
• The upfront portion of the guarantee fee, which is based on the credit risk attributes such as loan purpose, loan-to-value (LTV) ratio, and credit score decreased 2 basis points to 11 basis points on average in 2020.
• The ongoing portion of the guarantee fee, which is based on the product type (fixed-rate or adjustable-rate, and loan term), remained unchanged at 43 basis points on average in 2020.
• The average guarantee fee in 2020 on 30-year and 15-year fixed rate loans remained unchanged at 58 basis points and 36 basis points, respectively. The average fee on adjustable-rate mortgage (ARM) loans increased 1 basis point to 57 basis points.
• The average guarantee fee for cash-out refinance loans decreased by 2 basis points to 66 basis points in 2020, while the average fee for purchase loans increased by 2 basis points to 56 basis points. The average fee for rate-term refinance loans remained unchanged at 49 basis points in 2020.
• The average guarantee fee for loans with LTV at or below 70 percent decreased by 1 basis point to 50 basis points in 2020. The average guarantee fee for loans with LTV above 70 percent and at or below 80 percent decreased 2 basis points to 61 basis points. The average guarantee fee for loans with LTV above 80 percent and at or below 90 percent increased 1 basis point to 54 basis points. The average guarantee fee for loans with LTV above 90 percent increased 3 basis points to 54 basis points.
• For each credit score group, the average guarantee fee remained unchanged in 2020. For loans with credit scores below 660, the average guarantee fee was 82 basis points. For loans with credit scores 660–719, the average guarantee fee was 66 basis points. For loans with credit scores at or above 720, the average guarantee fee was 52 basis points.
• The average guarantee fee by seller size was 54 basis points for the large and small seller groups, and 55 basis points for the medium seller group.