In the past, it was harder for smaller players in the lending market to grab a share of the action, but it looks like that trend is slowly being changed. This is largely due to the fact that the difference between what bigger and smaller lenders pay for guarantee fees to Freddie Mac and Fannie Mae has been narrowing, allowing even some of the industry’s smallest loan originators to increase their share.


These guarantee fees for Freddie Mac and Fannie Mae loans have grown by 250 percent over the past six years. In 2009, the average basis points for these fees was 22, but that number rose to 58 in 2014. Despite the fact that the increase in basis points might otherwise be alarming, the good news from the report from the Federal Housing Finance Agency is that the difference between what smaller and bigger lenders pay has decreased such that smaller lenders might even have an advantage now.

What about Risk-Adjusted Basis?

To look at things on an equivalent playing field, smaller lenders appear to have paid a little bit less than their big counterparts in order to guarantee loans in both 2013 and 2014. As a result, the percentage of loans scooped up by very small lenders has grown from 8 percent to 28 percent. During that same time, as you might expect, the percentage of loans purchased from the five biggest lender sellers decreased, dropping from 60 percent in 2010 down to 39 percent in 2014.

Making a Difference for Smaller Lenders

The research backs up what industry leaders are already saying about the changes happening in the lending market. According to Community Mortgage Lenders of America executive director Glen Corso, G-fee pricing has enabled smaller lenders to become more involved and really maintain a solid presence in the market overall.

Since the bigger lenders had a pricing advantage over smaller lenders in past years, lenders found it easier and cheaper to sell their loans to big aggregators as opposed to Fannie Mae and Freddie Mac. Smaller lenders now have options: sell directly to Freddie and Fannie to retain the servicing, or release the servicing and work with the big aggregators. The price for servicing depends a great deal on whether these smaller lenders go to the bigger aggregators or to one of the government-sponsored enterprises.

G-Fee Policies Now

The FHFA most recently completed a review of their policies for these fees in April. They kept the general level of fees, making slight adjustments to the fee structure that will be active on September 1st. According to their report, the minor changes made should make little or no difference to borrowers.