Arizona Mortgage Rates August 8, 2008 (BK-0907309)
Mortgage Related Highlights This Week
Fannie Mae announced two increases in their fees — one that is “risk based” and applies differently to each borrower depending on “risk” and one that applies to all borrowers across the board which they call an “adverse market fee”.
While the calculations and guidelines may seem complicated in this announcement, the underlying logic is fairly simple. For the “risk based” fee, it uses your credit score and loan-to-value numbers to arrive at the fee that is charged. For the “adverse market” fee, it is charged on all loans across the board regardless of credit score or loan-to-value.
How much are these fees?
For the risk based fees, they are going up (there is a new model, see the grid for the full model) to as much as 3% on a given loan. For the adverse market fee, it is rising another .25% to .50% for all loans.
These fees are quoted in basis points (100 basis points = 1%) and sometimes I wonder if consumers think of fees quoted in %’s like poker chips in a casino — “ok, it is money, but it isn’t really money!”.
1% may seem like a small number and not all that onerous — but — how much is 1% of $400,000? FOUR-THOUSAND-DOLLARS.
According to the announcement, these fees go into effect for whole loans purchased on or after October 1, 2008 — but this week Citi was the first investor (that we are aware of at least) who changed their pricing as a result of this upcoming change.
Which means people can expect to pay more for a mortgage as a result of these fees being implemented.
We are hoping to have better news next week!
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