If you’re considering purchasing a home or refinancing a home in 2011, be prepared to pay higher mortgage fees, even if you have an excellent credit score and a large down payment. Things will be even worse for borrowers with lower credit scores and small down payments.
Following the lead of fellow mortgage giant, Freddie Mac, Fannie announced in a memo to lenders in its network that it had decided to impose a new schedule of higher add-on fees.
Critic’s view these new fees as a way for the two federal financial corporations to infuse more cash into their coffers in light of the massive loses they have sustained since the beginning of the financial crisis.
Freddie Mac and Fannie Mae have required massive federal financial infusions, estimated at close to $150 billion, since the housing market began deteriorating, and they now operate under a federal conservatorship arrangement. Economists expect that it will take billions more to keep the two institutions solvent.
But meanwhile, Fannie and Freddie continue to fund or guarantee upward of two-thirds of new mortgage originations. Because of their sheer size and market dominance, they play pivotal roles in determining whether — and how fast — the housing market can rebound.
The new fees aren’t scheduled to start until this spring. Potential buyers who have high credit scores and hefty down payments are expected to be surprised that even they are being targeted for higher "risk-based" fees.
As an example of how the new fees will affect potential buyers:
If you wanted to buy a house that requires a $300,000 mortgage, you have an impressive FICO score (above 800), and cash for a down payment of just less than 25%, Fannie now plans to charge an extra quarter of a percentage point of the loan amount, $750, to do the deal.
For those with a FICO score of 679, new fees could be about $1,500 on that $300,000 mortgage. Ouch!
Tags: mortgage loans, mortgage refinancing, credit scores, down payment, freddie mac, fannie mae, mortgage originations, mortgage borrowers, FICO score
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