Friday before a 3-day weekend. The perfect time to announce bad news.
Fannie Mae and Feddie Mac are going to raise guarantee fees, which they charge to lenders, an average of 10 basis points. To give you some persepctive, basis points for lenders averaged 26 points in 2010, and 28 in 2011. The 10 point increase represents more than a 25% jump in guarantee fees. This large increase WILL affect your mortage rate.
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Do you remember the 1992 film "Newsies"? It tells the story of a group of paperboys who went on strike because the newspapers were charging them more to deliver their papers. This point increase is similar; the lenders are being charged more fees for FHA loans. The difference is you definitely will not be singing and dancing about what these fees mean for your mortgage.
For a 30-year mortgage at $200,000, a buyer will pay about $4,000 more because of these fees.
Why are they doing this?
The FHFA Acting Director (Edward DeMarco) said, "These changes will move Fannie Mae and Freddie Mac pricing closer to the level one might expect to see if mortgage credit risk was borne solely by private capital." FHA is hopeing these increased fees will push some of their mortgages toward other providers.
I would like to echo the spirited cry of the Newsies and urge you to "Seize the Day"! These fees could be just the beginning of increasing mortgage rates in the near future. Get pre-qualified and lock in your rate today before the fees get applied to your loan.
About the Author:
Utah Dave - Daybreak Neighboorhood Expert and Local Resident
My friends nicknamed me Utah Dave in high school because they said it didn't matter where we went in Utah, I would know how to get there and who we needed to talk to. The name sticks today as UtahDave has formed into a professional real estate network of Neighborhood Experts all across the state. I live in Daybreak with my wife and 4 amazing children. I enjoy dancing (which is how I met my wife Dawn) as well as traveling, coaching, and learning.
