WASHINGTON -- Mortgage finance companies Fannie Mae and Freddie Mac, seized by the federal government last month, are canceling fee increases planned as they struggled to shore up their finances over the past year.
Freddie Mac said Friday it would not impose a fee increase scheduled to go into effect next month. The announcement followed a similar reversal by Fannie Mae Thursday night.
Freddie Mac, however, will raise fees next year for riskier loan products, including mortgages that allow interest-only payments for the first few years. Freddie also will require higher credit scores for "piggyback" loans that allow borrowers to make smaller down payments by taking out two mortgages.
Taken together, Freddie Mac said the changes would provide "some relief from the challenges in the current market environment," but added that it is following lending practices "that are prudent and largely applicable in all market conditions."
Both companies had announced plans to hike a fee on all loans purchased by the companies to 0.5% next month from 0.25%. For a $200,000 loan, that's a savings of $500.
The decision comes nearly a month after the companies, the largest buyer and backer of U.S. mortgages, were taken over by the government and saw their top executives outsted.
In recent months, Fannie and Freddie have hiked several fees for borrowers with blemished credit, while asking for bigger down payments. Real estate agents, mortgage brokers and homebuilders have all complained that the moves were stifling the housing market.
Fannie Mae Chief Executive Herb Allison said Thursday that the company is "evaluating all of our risk-management, underwriting guidelines, pricing and costs."
James Lockhart, director of the Federal Housing Finance Agency — which regulates Fannie and Freddie — said last month that any changes made by the companies should "reflect both safe and sound business strategy and attentiveness to the (companies') mission."