Fannie and Freddie Home Loan Fees to Increase
Posted by Benjamin Dona on Wednesday, February 9th, 2011 at 12:12pm.
The cost of getting a home mortgage (loan fees) from Fannie Mae or Freddie Mac are set to increase and will affect more borrowers, including those with stellar FICO credit scores. The fee changes actually were announced last year and they are now scheduled to go into effect on March 1 for Freddie Mac and April 1 for Fannie Mae.
According to the two mortgage giants, it is the first time since 2009 that they are raising risk fees and broadening the scope of borrower that will be affected. To avoid the new fees or to get a discount, most borrowers will need FICO scores of 740 or better and down payments of 25% or more. Lenders could absorb the cost, but most are expected to add it to their consumer loan costs immediately upon enactment.
While the increase is not huge, the new fees are still notable. For example, a buyer of a $200,000 property who has a 700 FICO score and a 20% down payment will pay $1,600 for the Fannie risk fee versus $1,200 before. If the borrower's FICO score is 680, the fee would be $2,800. For borrowers with Fico Scores above 740 and less than a 25% down payment, the additional risk based fee will be 0.25% of the loan amount. According to Fannie and Freddie, the new fees will hit 88% of their borrower categories and can be paid up-front, or the lenders can price them directly into the interest rate on the mortgage.
No matter how much the spokesman for these GSE's say these fees are necessary and nominal, you really have to wonder if this is not just another way for Fannie and Freddie to pad their coffers. Quite frankly, we see this as nothing more than another disgraceful move by these government backed entities (with tax payers dollars) that should be replaced.
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