Mortgage intermediaries retained more than 60% of an estimated $1.5 billion in US fee waivers during 2023 and 2024 instead of passing the full savings to homebuyers, according to October research.
The NBER working paper, by Neil Bhutta, Benjamin J. Keys and Adithya Raajkumar, examines a Fannie Mae and Freddie Mac fee waiver aimed at lower-income first-time buyers.
Pass-through differed substantially between loan officers. Those with a history of originating relatively expensive mortgages, after accounting for lender pricing, passed on less than 20% of the waiver.
The authors argue that pricing power can exist at the salesperson level as well as the lender level. Their estimates concern the programme and period studied, not every mortgage or every intermediary.
The working paper has not been peer-reviewed. It does not establish that the retained savings were illegal, or that a borrower was entitled to a separate cash payment equal to the waived fee.
A cheaper input does not guarantee a cheaper loan
A mortgage is a loan secured against property. The price a borrower sees combines the interest charged over time with upfront costs and any credits offered at closing.
Fannie Mae and Freddie Mac buy qualifying loans from lenders, helping lenders replenish the money available for further mortgages. The fee waiver studied here reduced a cost within that financing system.
The Federal Housing Finance Agency announced the targeted changes in October 2022. Its categories included first-time buyers at or below the area median income in most of the country, and below 120% of that measure in high-cost areas, alongside specified affordable-loan programmes.
Area median income is the middle income for the relevant local area. A threshold tied to it adjusts eligibility to local earnings rather than applying one national dollar limit.
A reduction in an intermediary’s costs can be reflected in lower borrower charges, a lower interest rate or a larger margin for the intermediary. Measuring the benefit requires comparing the loan’s total pricing, not simply searching a closing statement for a line labelled fee waiver.
Comparing offers makes the final price visible
The Consumer Financial Protection Bureau recommends requesting Loan Estimates from three or more lenders. These standardised disclosures allow borrowers to compare offers.
Its guidance on the form advises requesting the same kind of loan from each lender and checking whether the interest rate is locked. An unlocked rate can change, making quotations taken at different times less comparable.
Borrowers also need to consider upfront charges alongside monthly payments. Paying more at the start can buy a lower rate, while a lender credit can reduce the initial cash needed in exchange for different loan terms.
The research does not measure what every buyer could have saved by shopping around. Nor does the existence of a fee waiver remove differences in credit risk, loan size or other terms.
For policymakers, the result raises a question about delivery. Counting the fees waived inside a mortgage-finance system does not, by itself, establish how much support reached the intended homebuyers.
