Mortgage Rate News

There has been a lot of scrutiny regarding Fannie Mae and Freddie Mac, the two government chartered mortgage lenders that are the biggest buyers of home mortgage loans in the country. There are worries that the banks might fail, and even suggestions by some that the mortgage loans that the two banks have be divided up and redistributed to Fannie and Freddie according to “good” and “bad”.

But what you may not be hearing much about is the prospect that regular (or conforming) home mortgage loans could become more expensive. The evidence for this is a recent filing with the SEC by Freddie Mac. Every so often companies have to make a filing with the SEC to explain where they are at in their finances, and warn of future changes. The Mortgage Reports Blog cuts through the legalese and double-speak to let you know exactly what Freddie is proposing for home mortgage loans, and how it may affect you:

Loan-level fees, you’ll remember, are mandatory charges on a mortgage. Not closing costs, per se, but an interest rate adjustment to every mortgage application.

In this sense, Freddie Mac’s plan to add new loan-level pricing adjustments is like a tax on borrowing and would mark the third round of such fees since loan-level pricing adjustments were first introduced December 2007.

Mortgage rates used to based on the price of mortgage bonds alone. Today, it’s bond prices plus fees from Freddie (and Fannie). In other words, even if Wall Street mortgage rates fall later this year, Main Street mortgage rates could still rise because of new, mandatory borrowing fees for all mortgage applicants.

It’s not enough that the subprime mortgage market mess has created conditions in which it is harder to get mortgage financing; mortgage lenders are exacerbating the problem by adding new fees into the mix.

Tags: Fannie Mae, Freddie Mac, home mortgage loans, conforming loans,
subprime mortgage, mortgage interest, mortgage loan blog