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.
I write about Texas Home Loans , live in the Dallas, TX area and lend across the entire Great State of Texas!!
Your Texas FHA Expert and Dallas Mortgage Expert.