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Watch out everyone, some big price changes coming very soon on conforming loans

By Jon Sigler

Real Estate Agent with Coldwell Banker Realty RES.0808054

November 30, 2007 01:29 AM

Fannie Mae has announced some loan level price adjustments that will effect most conforming loans. Your credit score is going to play a much larger impact than it ever has in the past on your mortgage rate. This is not just going to be in effect on the "exotic" mortgages, it applies to the plain Jane 30 year fixed among others! Check out these changes that are going in to effect on loans today!

LTV> 70% & FICO < 620 - Charge of 2.00 points
LTV> 70% & FICO 620-639 - Charge of 1.75 points
LTV> 70% & FICO 640-659 - Charge of 1.25 points
LTV> 70% & FICO 660-679 - Charge of 0.75 points

What does this mean? Well to give you a real quote of a rate for your new loan, you will need to have the credit score, and even those with decent credit will be seeing a charge. That is going to be the hard part until that is a more commonly accepted fact in the market.

So let's say for example a customer is looking at a $200,000 loan for 90% of the purchase of their new house, and they have a 650 mid credit score. They are going to pay $2500 at closing, or they may see their rate be .375% higher, or costing them about $60 more monthly.

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Marsha Cleaveland

No longer in the sales business - Glendale, AZ

GRI, AHWD, CNE

Thanks for the heads up! At least we can be clear with our prospective clients about what they're up against.

Nov 30, 2007 01:32 AM

Jeanean Gendron

The Address Realty - Redding, CA

Specializing in Selling Unique Properties

Jon, I heard about this yesterday. I also heard that FHA is going to be coming out with very good loan programs for 2008 and that will be helping us out. I was waiting to see this surface. Thanks for the post.

Nov 30, 2007 01:44 AM

Craig W. Barrett

RE/MAX 100 - Hughesville, MD

Hughesville MD Real Estate

Interesting, thanks for the heads-up. I appreciate the information.

Nov 30, 2007 01:48 AM

Eric Bouler

Gardner Realtors, Licensed in La. - New Orleans, LA

Listening to your Needs

Risk assessments on the quality of the borrower, what a novel idea! Will not be long before the minotities are crying fowl and Congress will get involved. Seems like a common sense idea however.

Nov 30, 2007 01:54 AM

Dave Armstrong

VanDyk Mortgage - Grand Rapids, MI

Senior Loan Consultant - Grand Rapids, Michigan

Clearly the "magic" FICO score is going to become an even more important factor. It doesn't seem fair for a borrower to have a higher rate because his FICO score is "only" 679 when he may have a much lower debt ratio, more than 12 months reserves and may have no late payments at all but only pulls a 679 due to balance to limits, limited credit history etc. than a 680 borrower with less qualifications in these other factors. With the inaccuracies of the credit bureaus I really have a problem with what seems like a knee jerk reaction by Freddie and Fannie to gouge the general public by putting such a heavy emphasis on the "magic" FICO score and potentially ignoring the other strong risk factors involved.

Credit knowledge and educating the client is going to be huge.

Nov 30, 2007 04:49 AM

Anonymous

pcm-Texas

i agree with the lower debt ratio, but below 680 fico. My issue is that the pricing for an approve eligible loan is the same for an EA-1 customer with a 620 and below fico: example: pricing on 2 customers with the fico scores the same and the LTV at 72%, but one is an AE approved, and the other an EA-1 approved. The rate is the same?

Dec 04, 2007 05:08 AM

Lisa Epstein

Jay Epstein State Farm Insurance - Ukiah, CA

Thanks for the info, Jon. I appreciate the post.

Dec 04, 2007 05:32 AM

Shelby Chapin

The new changes do not affect expanded approval loans, see efanniemae.com

fyi

Dec 04, 2007 09:11 AM

Lewis Poretz

Apex Home Loans - Annapolis, MD

Business Development Manager

I have been aware of this for a while. The only thing i can say is we all play on the same mortgage field so rates are what they are. in my opinion, the credit scoring models need to be fixed.

Everyone hear that Nat City is no longer doing jumbo loans?

Dec 04, 2007 11:53 AM

Jon Sigler

Coldwell Banker Realty - South Windsor, CT

Sigler Sold Another! 860-306-8029

Lewis, Agreed, rates are what they are, we all have about the prices. I had not heard that Nat. City was no longer doing jumbo loans, but the local rep seems uninterested in my business so I pay little attention to them.

Dave, I think learning how to help our customers to improve their credit is going to be a bigger and bigger part of our business. Some of the scores that are taking hits here are not bad credit, they can get those from light credit, or poorly used credit, not just paying bills late. But they will be penalized as though they didn't pay on time.

Shelby, you are right these do not apply to Expanded Approval loans. If they did those would get pretty ugly price wise! It also doesn't apply to the My Community program loans.

A copy of the official Fannie announcement can be found here.

Dec 05, 2007 06:22 AM

Chad King

Southeastern Mortgage Processing, LLC. - Tampa, FL

Southeastern Mortgage Processing

Thanks for the heads-up. I appreciate the information

Dec 05, 2007 06:47 AM

Kate Bourland

Marketing with Kate - Redding, CA

Onlilne Marketing Mobile Marketing

This is one of those instances that explains why the FICO scoring needs to be outlawed. It simply allows for credit grantors to skim profit. Looks like lenders are just finding loop holes to boost profit.

What happened to the good ole days of manual underwriting!

Dec 05, 2007 08:49 AM

Watch out everyone, some big price changes coming very soon on conforming loans

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