New law increases guarantee fees for mortgages, will cause rates to rise

March 02, 2012 09:00AM

Interest rates for mortgages are set to go up, but quietly, the New York Times reported.

A government-mandated increase in guarantee fees will push the overall interest rates for mortgages up, and also raise interest rates on mortgages re-sold to Fannie Mae or Freddie Mac. Estimates put the increase at one eighth of a percentage point for now, the Times said. 

“It’s going to be silently passed through” from lenders to consumers, Richard Grohmann, a real estate attorney in Paramus, N.J. told the paper.

The increase in fees was part of the payroll tax reduction legislation that was passed last December. The guarantee fee is set to rise 10 basis points on April 1, but some lenders are already writing the fee into new mortgages.

Edward DeMarco, acting director of the Federal Housing Finance Agency, told Congress in a letter last month that he supports other, similar “continued gradual increases” in fees. [NYT]