January 12th, 2011 5:50 PM by BILL WILBANKS
Once again we see price increases today that will be baked in the cake in going forward. Remember, the lenders who made many of the loans that have become issues today are long gone two plus years ago and so are the problem products and parameters that fed the machine. Let's close the barn door now right? Only the vanilla products, lenders and brokers doing them are left standing today for pretty much the vanilla customer. What's the latest? Well you must have heard by now about the financial problems at Fannie Mae and Freddie Mac. In an attempt to offset their supposed risk based on the loan-to-value (LTV), credit score and whether the request was a purchase, rate and term (R/T) only refinance or cash out transaction, on loans with terms greater than 15 years, they both instituted Conforming Pricing Adjusters last year that added anything from 0 to 3 points to the price a lender would need to collect to make the loan payable to Fannie or Freddie on pass through.
Effective today we saw an additional 0.25% point minimum added to even the best of the best credit score borrowers across the board on all conventional conforming loans with the exception of the Freddie Mac Relief Refinance Mortgage sm which already had it added there to begin with last year. The 0 to 3% range is the same, but the tier level of LTV and score at which the adjuster now applies has changed. For example effective today conventional conforming customers wanting to finance anything over 75% (75.01%+) LTV with the highest scores of 740 plus will have a 0.25% point added to the price quote on a purchase or R/T refinance. The lower your credit score the higher the adjuster and the lower LTV at which it will kick in. So I guess anyone who can qualify for a new loan today is going to pay for everyone elses avarice that got us in this mess one way or the other. What it means is that either you will pay more at closing or take the next higher rate to cover it if it applies to you. The cost range is still 0 to 3% points. It's just a matter of when it applies that is the new realty folks. Thought you'd like to know.