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Fannie Mae Loan Level Price Adjuster Changes

By George Souto

Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149

January 12, 2011 10:59 AM

Fannie Mae announced last week it's new Loan Level Price Adjustments for (LLPA) for all loans that are Rate Locked on and after Monday January 17th. The revised Level Price Adjustments will also apply to conventional conforming loans locked prior to January 17th that request a rate lock extension with a new rate lock expiration date greater than February 18, 2011.

This means that if a Borrower is purchasing a home with a Conventional Mortgage that will be backed by Fannie Mae, and they have a Credit Score of 740 or higher, and are making a downpayment of 20% to 24.09% they will be assessed .25 points on their loan by Fannie Mae. That to me is what I would call over the top, and unreasonable.

A Borrower that has a Credit Score of 740 or higher is a great borrower, one that manages his/her money extremely well. Furthermore they are not making a minimal downpayment, they are putting down 20 to 24.09%. To penalize such a Borrower with points is something that I fail to understand.

This is one more reason why FHA continues to be the Loan Product of choice for most borrower.

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308, gsouto@mccuemortgage.com, or visit my McCue Mortgage Homepage.

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Barbara Altieri

Better Homes and Gardens RE Shore and Country Properties - Shelton, CT

REALTOR-Fairfield County CT Homes/Condos For Sale

George -- Over the top? Unreasonable? Yes, that's putting it mildly. That classification of borrower should be rewarded not penalized. FHA all the way!!

Jan 12, 2011 11:54 AM

Nick T Pappas

Assoc. Broker ABR, CRS, SFR, e-Pro, @Homes Realty Group, Broker/Providence Property Mgmnt, LLC Huntsville AL - Huntsville, AL

Madison & Huntsville Alabama Real Estate Resource

George, I totally agree with Barbara. I can understand raising the bar from previous years, but I think Fannie Mae is focusing on the wrong group.

Jan 12, 2011 12:54 PM

Kathy Sheehan

Bay Equity, LLC 770-634-4021 - Atlanta, GA

Senior Loan Officer

Spread the word. Once again we have another change that is going to cost the consumer more money.

Jan 12, 2011 02:04 PM

Marchel Peterson

Results Realty - Spring, TX

Spring TX Real Estate E-Pro

George, That just STINKS! They should be getting credit for having a high score and putting down 20%. WHAT ARE THEY THINKING!!!!!!!

Jan 12, 2011 02:47 PM

Paul McFadden

Responsive Pest Control - Seattle, WA

Pest Control, Seattle, WA.

George: Thanks for the update. Obviously for those of us in the business, it's going to get tougher before it gets better!

Jan 13, 2011 10:33 AM

Nick T Pappas

Assoc. Broker ABR, CRS, SFR, e-Pro, @Homes Realty Group, Broker/Providence Property Mgmnt, LLC Huntsville AL - Huntsville, AL

Madison & Huntsville Alabama Real Estate Resource

George, you are closer to understanding this than many of us...what's the reasoning here...it almost sounds like they are over compensating for past business practices...like Marchel said; "What are they thinking?"

Jan 13, 2011 01:23 PM

1~Judi Barrett

Integrity Real Estate Services 116 SE AVE N, Idabel, OK 74745 - Idabel, OK

BS Ed, Integrity Real Estate Services -IDABEL OK

George,

I do not understand. Do they not want these borrowers? Are they trying to make FHA look even better. Also I've had borrowers that credit scores were in the 650 range that were told their scores were too low to qualify for a loan right now. looks like your chart would dispute that. :)

Jan 13, 2011 01:33 PM

Jennifer Fivelsdal

JFIVE Home Realty LLC | 845-758-6842|162 Deer Run Rd Red Hook NY 12571 - Rhinebeck, NY

Mid Hudson Valley real estate connection

George all I can say is this year is going to be an interesting one on many levels.

Jan 13, 2011 07:06 PM

George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

Barbara, I agree. Someone with Credit Scores 740 and over have proven that they manage their finances well, and should be rewarded and not penalized.

Nick, that is what they are doing. They are still trying to dig out from their past mistakes, and have hit those with questionable credit pretty hard. So now they just have one group left to try to still get more money out of. What makes this even more unfair is that Fannie keeps all the money and Lenders get to deliver the news and collect the fees for them.

Marchel, they are only thinking of their financial situation, and recouping money to get their heads above water. As always it is those that did not create the problem that have to pay to correct it.

Kathy, well put.

Paul, I keep on saying that it has to turn back around, but they just keep on slamming us more and more.

Judi, they can get a Conventional Mortgage with Credit Scores as low as 620, but the problem is that many Lenders will not accept that even though the guidelines allow for it. Here in Connecticut Lenders have to also be concerned with the overall costs of a loan, we can't go over 5%. So if a borrower with 650 credit scores is putting down 20% he/she getting hit with 3 points from Fannie for the Credit Score. Now let's say that it is a multi-family house they are going to tack on another point. That puts you at 4 points without even factoring in the costs of doing the loan, so a Lender would have to deny that loan. Their are other reasons. Even if they can stay within the 5% total cost, a Lender might feel that there are other factors that make the loan to risky for them, so they will deny the loan even if it meets the guidelines.

Jennifer, let's hope that it starts being interesting in positive ways, not not negative ones like this change.

Jan 14, 2011 05:26 AM

Peggy Chirico

Prudential CT Realty - Manchester, CT

REALTOR® 860-748-8900, Hartford & Tolland County Real Estate

Thanks for the breakdown, George - this is very helpful. It is really going to make things more ridiculous.

Jan 14, 2011 09:43 AM

George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

Peggy, ridiculous is a good word to use to describe this.

Jan 14, 2011 09:47 AM

Chris Olsen

Olsen Ziegler Realty - Cleveland, OH

Broker Owner Cleveland Ohio Real Estate

Hey George -- I had no idea this was coming into effect. Wow, I just refinanced as a 740+ buyer with 20% down, so I'm guessing the lender would have bumped my rate by .25%? I can't imagine with still the lending issues that persist, that throwing more disincentives in the mix is somehow going to help.

Jan 14, 2011 02:28 PM

George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

Chris, the interest rate would have been the same, but you would have paid .25 points in additional Closing Costs to Fannie.

Jan 14, 2011 03:29 PM

Frances C. Rokicki

Fran Rokicki Realty, LLC - Bolton, CT

Broker-Mentor,CRS

George, If we all wrote to our Congressmen, now Richard Blumenthal in Connecticut, it might help. All of the newbees is Congress know that they were elected to stop the nonsense, let's point this one out to them!

Jan 16, 2011 12:35 AM

Frances C. Rokicki

Fran Rokicki Realty, LLC - Bolton, CT

Broker-Mentor,CRS

Should I just forward this, to them? Maybe, they will seek your advice before they do something this stupid, next time? Can we vote politicians out, when they do stupid things to hurt the consumer who voted them in?

Jan 22, 2011 01:55 PM

Esko Kiuru

Bethesda, MD

George,

And look at a borrower with FICO at 720-739 and makes, say, 29% down payment, he has fork over .25 points. That's overdoing it I dare say.

Jan 25, 2011 08:50 AM