FHFA seeks comment on risk-based pricing model

The Federal Housing Finance Agency today announced that it is seeking public comment on Fannie Mae and Freddie Mac’s single-family pricing framework and the goals and policy priorities that the agency should pursue. FHFA also seeks input on the process for setting the government-sponsored enterprises’ single-family upfront guarantee fees, including whether it is appropriate to continue to link upfront guarantee fees to the Enterprise Regulatory Capital Framework, set risk-based upfront guarantee fees for both GSEs, and set a minimum threshold for both institution’s return on capital.

An important component of Fannie Mae and Freddie Mac’s current single-family mortgage guarantee pricing is risk-based pricing, where certain guarantee fees may vary with the risk characteristics of a loan, according to FHFA. The ERCF has a significant effect on the risk-based pricing component. The agency said it will use the information gathered through public comment to enhance its ability “to continue to ensure that the Enterprises fulfill their mission by operating in a safe and sound manner so that they serve as a reliable source of liquidity and funding for housing.”