Under the new guidelines, even applicants who assumed that their FICO scores would get them favorable rates will be charged more unless they can come up with down payments of 30% or higher.
Reporting from Washington — It’s not what home buyers, sellers and refinancers want to hear, but they need to know that Fannie Mae and Freddie Mac are increasing their mandatory fees and toughening credit score and down payment rules as of April 1.
Most major lenders already are pricing in the higher fees, effectively raising costs to consumers immediately. Under Fannie’s and Freddie’s new guidelines, even applicants who assumed that their FICO scores would get them favorable rates will be charged more unless they can come up with down payments of 30% or higher. For example, a buyer with a FICO score of 699 who can bring a down payment of about 25% to the table will now get hit with a 1.5% “delivery” fee at closing under the new guidelines.
A buyer with a FICO score between 700 and 720 will pay an extra three-quarters of a point. Even someone with a 739 FICO — once considered a platinum guarantee of the best rates available — will get dinged with a quarter-point add-on.
Applicants who seek to buy a condominium and cannot come up with a 25% down payment will be hit with a three-quarter point add-on penalty, no matter how high their credit score, simply because they are not buying a traditional detached, stand-alone home.
Buyers of duplexes, in which one unit is owner-occupied and the other is rented, will be charged a flat 1% add-on from Fannie, even if they’ve got FICO scores above 800 and make 50% down payments. Refinancers who take cash out at settlement also will be forced to pay extra — as much as three points if they’ve got low credit scores and modest equity stakes.
Both Fannie Mae and Freddie Mac say they are tacking on these fees to counter higher risks and losses associated with certain loan products, buyer equity stakes and credit scores. Declining home values in many parts of the country are intensifying losses for both companies when loans go to foreclosure.
Quasi-private enterprises until last September, Fannie and Freddie now are operating under the control of federal regulators and are bleeding billions of dollars of red ink.
Freddie spokesman Brad German said some of the loan categories and credit risk combinations targeted in the latest round of fees “default at four to eight times” the rate of other mortgages in the company’s portfolio. “We have to manage these risks appropriately,” he added, and that means pricing them based on the probability of higher losses.
But realty agents, mortgage bankers and brokers are incensed at the new round of fee increases, calling them counterproductive in an environment in which housing needs help, not new impediments. They have begun lobbying Congress and the two companies’ federal overseers to scrap the latest add-ons.
By Kenneth R. Harney
Source: Los Angeles Times – U.S.A.
Febrero 22nd, 2009 a las 6:50 am
[...] Astounding Language wrote an interesting post today onHere’s a quick excerptUnder the new guidelines, even applicants who assumed that their FICO scores would get them favorable rates will be charged more unless they can come up with down payments of 30% or higher. Reporting from Washington — It’s not what home buyers, sellers and refinancers want to hear, but they need to know that Fannie Mae and Freddie Mac are increasing their mandatory fees and toughening credit score and down payment rules as of April 1. Most major lenders already are pricing in the higher fee [...]
Febrero 22nd, 2009 a las 7:15 pm
[...] Fannie Mae, Freddie Mac are raising fees, toughening rules for credit scores and down payments – veoyalquilo.com 02/22/2009 Under the new guidelines, even applicants who assumed that their FICO scores would get them favorable rates will be charged more unless they can come … are intensifying losses for both companies when loans go to foreclosure. Quasi-private enterprises until [...]