Regulatory Arbitrage Alert! FHFA’s Calabria Ends G-Fee Discounts For High-volume Lenders Like Quicken

Recently Federal Housing Finance Agency Director Mark Calabria issued a directive ordering the end of the GSEs’ practice of guarantee fee discounts for high-volume lenders.

The Temporary Payroll Tax Cut Continuation Act of 2011 required the FHFA director, in setting guaranty fees, to:

  • “provide for uniform pricing among lenders;” and
  • “provide for adjustments in pricing based on risk levels.

From my FNAN 432 class at George Mason University using Python to analyze Freddie Mac’s Q4 2017 online mortgage data,

All Data Average St. Deviation
FICO 748 110
LTV 74 16
DTI 35 10
Count of Quicken loans: 18,261 (about 6% of all the loans)
Quicken Average St. Deviation
FICO 730 50
LTV 71 15
DTI 36 10

Quicken has the lowest FICO (credit) scores of lenders selling loans to Freddie Mac and lower LTV and higher DTI than the rest of the pack.

Yes, as lenders try to avoid regulatory burdens, lenders like Quicken originate loans and sell to Fannie Mae and Freddie Mac, we may see a change in Fannie and Freddie’s loan purchases from non-bank, high volume lenders.

My students will have an update on Fannie Mae loan purchases by Monday.

It’s Always Sunny at GMU School of Business using Python in my class! 

 

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