EVEN HOME BORROWERS WITH STRONG CREDIT SCORES FACE HIGHER FEES!
THOSE WITH FICO SCORES OF 680 OR LESS, WITH LESS THAN 30% DOWN PAYMENT, COULD PAY $5,000 MORE!
I met with one of Dean's Team Preferred Lending Partners, Rich Bira of First Capital Mortgage, last week during our Monthly Business Networking Group in the West Loop in Chicago. Some breaking news he shared - big mortgage investors Freddie Mac and Fannie Mae will be instituting significant fee increases for borrowers who were previously given "Top Drawer" treatment by their lenders!
At the same time, two of the largest issuers of Private Mortgage Insurance, which protects lenders issuing loans with less than 20% down payment - are raising premiums on those with FICO credit scores in the high 600's. These costs will be passed on to consumers as higher up-front closing costs, or in the form of higher interest rates on mortgage loans.
Major mortgage investors have experienced record default rates in recent months, and they feel the escalated fees for the credit-qualified, but not top-group of borrowers, will cover their increased risk. Previous guidelines gave the best rates and terms to those whose credit score exceeded 620.
Many loan originators fear that higher costs will scare away otherwise-qualified home buyers, and could slow recovery in the residential real estate market. "This is outrageous," said Steven Moore, a mortgage broker with 1st Solution Mortgage in Falls Church, Va. "On a loan of $300,000 and with a credit score of 675 -- which is not a bad score -- and a 75 percent loan-to-value ratio (25 percent down payment), the cost is an additional $2,250 per loan." These added fees would add another $1,500 if the borrower does a cash-our re-finance to consolidate some debt. If the same borrower wants to do a cash-out refinancing to consolidate debt, the new Fannie-Freddie fee schedule will add another. On a $400,000 loan, the extra fees would total $5,000, says Moore.
Although Fannie Mae and Freddie Mac will not impose their revised fee structure until March 1, 2008, some unscrupulous loan originators have already begun charging the fees. Borrowers, please check your Good Faith Estimate of Closing Costs, which your lender must provide as required by law, to verify all loan charges.
Review further details on these new fees in Kenneth R. Harney's story in Sunday's Chicago Tribune.
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