FHFA is the Governing body over mortgages. They are in charge of FHA, Fannie Mae, Freddie Mac – all mortgage types available. They are the final word in licensing for loan officers, and they are suppose to be the ones who are looking over the shoulders of the Banks to be certain they are not taking on too much risk with mortgage loans.
They announced at the end of August that Fannie and Freddie will be charging an additional fee starting in November… you may be scratching your head and wondering why that’s important.
When you’re shopping for a mortgage, how your loan is structured affects your final mortgage rate. Do you want a 30-year fixed rate mortgage or a 15-year fixed rate one? Do you need a 30-day rate lock or a 45-day rate lock? Is your credit score 740 or is your credit score below 640? Each of these options helps to set your final mortgage loan program, the cost of that program – and ultimately what mortgage interest rate you will be able to get.There are some other factors in determining your mortgage rate, too. These “behind-the-scenes” costs are the ones that we are talking about with the FHFA announcement. The announcement deals with the “Guarantee Fee.”
In ADDITION to PMI, which is collected to cover loses on an individual loan level. A guarantee fee is a fee charged by Fannie Mae, Freddie Mac and other securitizers of mortgage-backed bonds. It’s “pool” related – guarantee fees (referred to as “G” fees) help to pay for such mortgage-backed security-related services as the pooling, servicing, and selling of MBS. They’re also used in an insurance-like capacity, protecting a mortgage securitizer against credit-related losses in a portfolio.
For every .10% of extra fees charged, mortgage rates will generally go up .125%… so you can see that it makes a difference!
Higher Mortgage Rates Ahead
In 2010, the average g-fee was 26 basis points per loan. By 2011, however, that average had climbed to 28 basis points. This means that, last year, on a 3.50 percent mortgage, 0.28% was paid to the mortgage-backer annually, whether it be Fannie Mae or Freddie Mac. (according to the FHFA data)
How do you think the US is currently paying for all of the deficits we are mounting up?
Late last year, Congress extended FICA tax breaks through February 29, 2012 at a cost of $33 billion. To recoup that cost, the nation’s lawmakers instructed the FHFA to increase its guarantee fees by 10 basis points for all new mortgages. Several weeks later, mortgage rates crossed into the 4s. Then, in May, the FHFA made an announcement in which it said that it reserves the right to change its g-fees without notice. 4 months later, it’s acting on that right.
In the announcement, FHFA said that on Nov 1, 2012 they are raising the G-Fees on Fannie and Freddie backed mortgages an additional .10%, meaning rates are likely to go up by .125% to cover the fees. Because these fees are not put in place by closing date – rates are expected to raise between .125% and .25% in the next few weeks.
The FHFA says the move is meant to make government-backed loans less attractive as compared to portfolio loans, and to other private mortgage money.
Another beneficiary will be the FHA. Because FHA is not raising its g-fees in-kind, FHA mortgage rates will continue to improve as compared to conventional ones. The FHA’s share of the purchase money market should improve later this year and into 2013.
Just when folks thought that the QEIII change was going to drive rates down… it could end up being a “neutral” event.
Looking for a new home, or want to know more about no money down mortgage programs in NC? Call Steve and Eleanor Thorne, NC Mortgage Experts at 919 649 5058. Connect with us on Facebook and get all of the news about ways to get today’s best mortgage rates!
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