Loans get more expensive again..... New 'Risk Based Pricing' rate adjustments

By
Mortgage and Lending with NMLS# 335055 335055

New Risk Based Pricing - Rate Adjustments

Fannie Mae does it again.... Raising fees on borrowers.

Effective for deliveries on or after April 1, 2009.... Which means when the loan is sold to Fannie long after closing..... Expect these new rate adjustments within the week at your local lender.

So, what is Risk based Pricing?

It is a Loan Level Price adjustment..... Which is a fancy term for the POINTS that Fannie Mae demands from borrowers based on their pricing matrix. Two factors go into pricing matrix..... Credit core and LTV(loan to value).

https://www.efanniemae.com/sf/refmaterials/llpa/pdf/llpamatrix.pdf <= for those that like the nuts & bolts stuff.

So how does this work:

You have an 800 credit score and are putting 20% down on your purchase. Your risk is an additional .25% in loan discount fees......

Or.... let's say that you have a 670 credit score and are putting down the same 20%.... You will be asked to pay 2.5% of th loan amount in discount fees to Fannie Mae. That is $10,000.00 in FEES on a $400,000 loan!!!! WOW!!

Now, some or all of this can be rooled into the interest rate.... So, in other words, you can avoid paying the fees by accepting a higher note rate. So a quick look at the rate sheet tells me that most lenders are quoting about 4.75% or so on Conventional Loans. To roll in 2.5% in delivery fees..... you would be taking an interest rate of 5.25% or MORE!!! (changes daily).

 

Those are the facts. This is the new state of the mortgage pricing. And while we DID HAVE Loan Level Price Adjustments before..... They are just going up more.

 

I find it interesting that these changes come on the heels of FHA changing their PMI rates to more closely resemble Conventional Rates. It is like both Fannie and HUD(FHA) are trying their best to NOT do loans.

 

 

Tom Burris
DallasLoanGuy.com

Dallas, TX

http://www.dallasloanguy.com/
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I write about Texas Home Loans , live in the Dallas, TX area and lend across the entire Great State of Texas!!

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Comments (3)

Angelia Garcia
Pure Realtors - Dallas, TX

thanks for the update.  Hope all is well.

Jan 12, 2011 12:55 PM
Donna Harris
Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com - Austin, TX
Realtor,Mediator,Ombudsman,Property Tax Arbitrator

That is just ridiculous. Instead of adding fees, they should just say This is the rate for this score, and not letting buyers know there is something else on top of the rate.

Jan 16, 2011 12:20 AM
Tom Burris
NMLS# 335055 - Baton Rouge, LA
Texas/Louisiana Mortgage Pro - 13 YRS Experience

Donna,

Many lenders price that way.... They roll the risk fees into the rate.

I just try to be 100% transparent.

 

Jan 16, 2011 04:58 AM

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