In this report, we assess the impact of FHFA’s decision Friday to trigger the g-fee increase presaged in recent agency statements. Many key questions on how the fees will be equilibrated and which risks will trigger what fees are still unanswered. Even so, FHFA believes the fee hike will spark a resurgence of private capital into the market. In the absence of clear policy on risk retention, regulatory capital and other clamps on PLMBS, we doubt it. Indeed, with the g-fee spread between Ginnie Mae and the GSEs now widening to 42 bps, lenders will have a compelling fee incentive to send as much HLTV business as they can to FHA.
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