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FNMA and FMAC's new fees fly in the face of the Fed's resolve to reduce rates.

By
Mortgage and Lending with Surefast Mortgage

At the same time the Fed is speculated to reduce rates from .25 to .5 a point, Fannie Mae and Freddie Mac conspire to tack appalling fees to their loans. No. These are not fees applicable only to sub-prime borrowers, these fees are directed at the prime borrower (credit scores of 620 and above.)

An FHA loan previously included a 1.5% up-front fee for PMI. Now, if you have a score between 620 to 639, you can just tack another 1.75% onto your fees.

OUCH! What are they thinking? On a $200K purchase, the PMI adds $3000 to the pre-paid finance charges. With the new fees imposed by Fannie Mae and Freddie Mac an additional $3500 will be required in pre-paid finance charges for anyone with a score between 620 - 639.

The only way to make that up-front fee go away is to increase the interest rate, but it just doesn't work that way. Most lenders cap yield spread premium on FHA loans to such a low amount that raising the rate to cover the new up-front fee isn't an option. This is cash out of pocket folks. Pockets that are already being turned inside out, picking through the lint to find the money to get into a home.

 Fee Structure Based on Credit Score

< 6202.0 %
620 - 6391.75%
640 - 6591.25%
660 - 6790.75

Come on, Uncle Sam. Do you really think we can afford any more help like this?

Comments (3)

Heather Fitzgerald
REALTY WORLD-Harbert Company, Inc. - Greenwood, IN
REALTOR Greenwood Indiana Real Estate

I have a friend that is a mortgage broker, and he said this all starts in January.  Is that true on what you are saying also?

 

Thanks,

 

Heather

Dec 10, 2007 05:20 AM
Kate Bourland
Marketing with Kate - Redding, CA
Onlilne Marketing Mobile Marketing

Heather, these were supposed to take place in January, but my understanding is that it's all ready taken effect.

The fees make no sense, I think that the whole industry is applying knee jerk reactions that have not been thought out.  At the core of the issue is FICO.  The model is not even fair or consistent across all borrowers.  Makes me crazy.

At this juncture all we can do is live with it until the pendulum effect swings back the other direction.

Dec 10, 2007 05:45 AM
Carl Pruitt
FHA Loan Advice - Buford, GA
http://FHALoanAdvice.com
I hear rumblings that lenders are going to start making similar adjustments for FHA loans! That will be unpleasant on top of risk based UFMIP.
Dec 22, 2007 03:28 PM