Conforming mortgages are getting more expensive -- but not because of mortgage rates.
To protect against further weakness in the housing sector, Fannie Mae and Freddie Mac are instituting "delivery fees" on all conforming mortgages, effective March 2008.
Fannie Mae's Adverse Market Delivery Charge and Freddie Mac's Market Condition Delivery Fee will add a one-time, quarter-percent fee to every home loan purchased from mortgage originators.
This means that on a $100,000 conforming mortgage, the borrower could:
- Pay a $250 fee out-of-pocket
- Accept a slightly higher interest rate that "finances in" the higher fee
Because the fee is in percentage terms, as the loan size increases, so does the fee. A $300,000 mortgage will carry a $750 fee, for example.
Unfortunately, mortgage borrowers may not get to choose on how they pay the extra cost. Many mortgage lenders are just adding it to their rate sheets.
Be aware, the 0.25% fee does not apply to all loans -- only to loans sold to Fannie Mae and Freddie Mac. This specifically excludes portfolio loans and sub-prime loans.
If you're not sure for what type of loan you are applying, be sure to ask.
Ilyce N. Powell is a Certified Mortgage Planning Specialist (CMPS) with the Carteret Mortgage Corporation. A member of the National Association of Responsible Loan Officers (NARLO) and the Financial Planning Association (FPA), she is also affiliated with the National Association of Mortgage Brokers (NAMB) and the National Association of College Funding Advisors (NACFA). Her goal is to educate as many consumers as possible in the hopes of stamping out financial illiteracy across the nation.
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