Mortgage Giants Fannie Mae and Freddie Mac announced that they are expecting more revenue from mortgage loan production in 2011 to cover their costs. Where is that money coming from? The 2011 Consumer. The additional fees they will begin charging in April are marked as Risk Based, however they will affect ALL borrowers – no matter what the downpayment or credit scores are.
In a Dec. 23 memo to lenders in its network, Fannie announced that it had decided to impose a new schedule of higher add-on fees, similar to what Freddie Mac — the other huge congressionally chartered mortgage investor — rolled out to jeers from the real estate industry just before Thanksgiving.
The new fees come as no surprise, I guess considering that each month the taxpayers are dumping billions of dollars into the Agencies to keep them afloat. Even though the Congress made enormous changes with the Dodd Frank Banking and Consumer Protection laws last summer, Fannie and Freddie were left out of the legislation. Later this month, the Obama administration plans to submit long-promised proposals to Congress on what to do with the two — phase them out, restructure them, privatize one or both of them… or maybe they will come up with some other out of the box solution.
It’s important to remember that Fannie and Freddie still have their hand in over 2/3 of ALL new mortgage lending done in the United States.
The new fees scheduled to start this spring, don’t appear likely to make financing a home any easier. Some potential buyers who have high credit scores and hefty down payments may be surprised that even they are being targeted for higher “risk-based” fees.
Consider these examples of how Fannie’s revised list of loan add-ons will affect borrowers:
$300,000 mortgage, above 800 Middle Credit Score, cash down payment of just less than 25%
With the changes in April you will be hit with a $750 fee equal to 1/4% of the loan that we don’t currently charge.
$300,000 mortgage loan, credit score of 679, down payment less than 20%
Fannie will soon begin hitting you up for 2.75% in add-on fees — a staggering $8,250 solely attributable to your FICO and LTV ratio.
That’s $1,500 more than what you are currently being charged.
But these fees are just the start of the multilayered, cumulative risk-based pricing system that both Fannie and Freddie employ. Every perceived risk factor in a loan transaction receives its own separate add-on fee, all of which get totaled up for your final loan charges.
We’ve been telling folks to lock into a mortgage loan NOW… and we still think this is the BEST advice we can give you!
If you, your family or your friends are considering a mortgage loan for a home purchase or a refinance – please call Steve and Eleanor Thorne, 919-649-5058
I try and answer all questions :)