Archive for January, 2011
January 14 2011
Let me start by stating the fact that 75% of loans in San Diego and across the country are Fannie Mae and Freddie Mac products.
Both GSE’s started with a call “risk-based pricing” to be able to price in risk from borrowers who have lower credit scores. It looks like these fee-based premiums are now for most Freddie Mac and Fannie Mae loans even for borrowers with stellar credit.
Under the new pricing borrower with 800 credit score is putting 24% down will have to pay .25% to fee. To put this in perspective on a $400,000 loan that’s $1000 more in fees. A borrower with a 679 score at 79% loan-to-value would be hit with an astronomical 2.75% fee on the same $400,000 house that’s $11,000 in fees! Some of the other new adders are for condominiums there is a .75% fee and there is an adverse market fee which is pretty much every neighborhood in the country (according to Freddie and Fannie ) of .25%.
I understand the risk-based pricing model is to charge more for borrowers who pose more risk but it seems now that everybody needing a loan is seen as a risk by the GSE’s.
This is only a few of the price increases that make it nearly impossible for San Diego home buyer to get that ” billboard” interest-rate that most companies advertise.
Above is a chart of a few of the price adds that go into effect next week. Please note that none of these ads apply the 10 or 15 year mortgages.
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