Fannie and Freddie increase fees on high balance loans and second homes – Orange County Register


If you’re considering taking out a high balance mortgage or second home through Fannie Mae or Freddie Mac, you need to act quickly – and probably no later than January 31.

That’s because the Federal Housing Finance Agency (the regulator and conservative of Fannie and Freddie) has announced plans to add a goliath fee on loans issued with backing from these two mortgage giants.

In high cost Los Angeles and Orange counties, a high balance mortgage is a loan ranging from $ 647,201 to $ 970,800. Fees apply to owner-occupied housing, unoccupied housing, purchase loans, refinancing loans, and cash refinancing.

Technically, the new fees go into effect on April 1, but lenders are likely to pass these fees on to consumers about 60 days before the official start date of that money foreclosure. We are most likely talking about February 1. Especially in the current context of Omicron infected labor shortage, it takes time to assess, process, secure and finance your loan before delivering it to F or F.

The sooner you secure your rate foreclosure, the better, just like yesterday. No kidding.

Depending on your loan-to-value ratio (down payment or remaining equity in the case of refinancing), this new mandate will be charged an additional quarter to three quarters of a point for a high balance loan. For example, a quarter point on a loan of $ 850,000 equals $ 2,125; and three-quarter point equals an additional expense of $ 6,375 for you and yours.

Assuming the fee adds half a point to your cost, that would translate to a 0.125% higher mortgage rate. The rate would be 0.25% higher if you received a three-quarter point fee increase.

For example, on a fixed loan of $ 850,000 over 30 years at 3.25%, the payment would be $ 3,699. At 3.5%, the payment would be $ 3,817, or $ 118 more per month.

It’s even worse for financing a second home. We’re talking about an addition range of 1.125% to 4.125% extra points – the lower amount if you have at least 40% down payment or equity, the higher amount with a minimum down payment – say 10%.

On a loan of $ 500,000, adding 1.125 points would cost an additional $ 5,625.

Federal regulations prohibit lenders from charging borrowers more than 3% in points and origination fees. But lenders will likely charge a higher interest rate on the loan if their costs go up.

For example, if you invest 10% in a second home and try to absorb an additional 4.125%, your rate could increase by 0.75%. On a 30-year, $ 500,000 fixed rate mortgage with a 3% rate, the payment would be $ 2,108. At 3.75%, your principal and interest payment would be $ 2,316, or $ 208 more per month.

And that comes just six months after FHFA interim director Thompson sang in a press release about removing “unfavorable market refinancing fees” by half a point than his predecessor, the director. Mark Calabria, instituted in December 2020. It was about helping families. reduce their housing costs and save families more money. This idea quickly faded with this new announcement.

This press release even had the audacity to say, “The FHFA expects lenders who charged borrowers fees to pass cost savings on to borrowers.”

To my knowledge, Fan and Fred have never rebuffed market fees that are unfavorable to lenders. And lenders have never repaid borrowers $ 5.3 billion raised to amortize an unfavorable mortgage market that never materialized.

A host of affordable housing programs that are primarily purchase-oriented are excluded from these new fees.

“These targeted price changes will allow (Fannie and Freddie) to better accomplish their mission of facilitating fair and sustainable homeownership, while improving their regulatory capital over time,” said the Thompson announcement.

Call me cynical. If the FHFA sticks to people who it believes can more easily afford this hidden tax (borrowers with larger mortgages and second home financing), then why does the FHFA not use a part or all of these fees to subsidize the costs of low to moderate income borrowers?

If you can’t complete your transaction before the fee increase takes effect, you’re still likely to find your best deal with a high balance from a Fannie or Freddie conventional lender.

Second homes are another story. You might find cheaper second home prices elsewhere. I have found a rate as low as 3.25% with no points, but with a 20% drop.

Freddie Mac Rate News: The 30-year fixed rate averaged 3.22%, its highest rate since May 2020 and up 11 basis points from last week. The 15-year fixed rate averaged 2.43%, up 10 basis points from last week.

The Mortgage Bankers Association reported a 2.7% drop in mortgage application volume from the previous two weeks.

At the end of the line : Assuming a borrower gets the 30-year average fixed rate on a compliant loan of $ 647,200, last year’s payment was $ 198 lower than the $ 2,806 payment this week.

What I see: Locally, well-qualified borrowers can obtain the following fixed rate mortgages without points: 30-year FHA at 2.5%, 15-year conventional at 2.5%, 30-year conventional at 3.25% , a 15-year conventional high balance ($ 647,201 to $ 970,800) at 2.75%, a 30-year conventional high balance at 3.375% and a 30-year fixed jumbo at 3.25%.

Eye-catcher loan of the week: A 15-year fixed at 2.625% free of charge.

Jeff Lazerson is a mortgage broker. He can be reached at 949-334-2424 or [email protected] Its website is www.mortgagegrader.com.


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