Fannie Mae & Freddie Mac Raising Fees
Filed under: Market Comentary
Potential home buyers who do not have the money for a big down payment and with less than perfect credit scores may be facing an increase in mortgage costs starting next spring.
According to a few different articles by Nick Timiraos, mortgage giants Fannie Mae and Freddie Mac will be raising their fees that they charge lenders, and thus, the lenders will most likely be passing these fees on to the home buyers.
Fannie Mae and Freddie Mac, the mortgage-finance companies that have the majority of the government-back mortgages, came out with some of the increases that borrowers can expect, according to their web site.
Timiraos listed the following in his article:
1. A borrower with a 30-year fixed-rate mortgage, a credit score of 735, and a 10% down payment will see fees rise from the current rate of 0.75% to 2% of the loan.
2. For those borrowers making a 10% down payment and who have a 750 credit score, fees are to increase from 0.5% to 1.5% of the loan amount.
3. Borrowers with credit scores of 775 and a 10% down payment will see fees rise from 0.5% to 1%.
In addition, Timiraos explained that even borrowers with higher down payments aren’t likely to escape some of the rising fees of Fannie Mae and Freddie Mac. A borrower, for example, that has a credit score of 690 and has enough money for a down payment of 25%, is still going to see their fees go up from 1.5% to 2.25%.
These higher fees, along with the rising interest rates and new mortgage rates, could even make it more difficult for potential home buyers with not perfect credit.
According to Timiraos, Fannie Mae and Freddie Mac have been working with their regulator, the Federal Housing Finance Agency (FHFA), on these changes. FHFA has said that Fannie and Freddie should raise their fees in order to make non-government-backed lending more competitive, especially on riskier loans.
An FHFA senior official mentioned that even with these changes by Fannie Mae and Freddie Mac, they will still be charging less that what the regulator believes a private investor would require to meet a traditional rate of return.
If you have any questions about the increase in fees from Fannie Mae and Freddie Mac, please give me a call and we can discuss that as well as any other information you are concerned with.
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