Monday, January 19th, 2009 at 11:24 AM
Two-Point Add to Fannie/Freddies
Over the last few days we’ve been hearing about a new 2% fee being imposed on Fannie/Freddie mortgages. It looks like it’ll depend on the lender - this came from a wholesale mortgage banker describing the situation:
I understand that Freddie/Fannie will only allow 10% of portfolios to include high balance loans. If they exceed more than 10% then Freddie/Fannie will impose this fee. Thus, GMAC was really aggressive for a while with the high balance and now more aggressive with regular conforming.
Each lender is different and depends what they have going on with the portfolios they are currently trying to sell to Fannie and Freddie. This fee may be around for a while as many high balance loans have been registered and/or locked.
Thus, you can explain to your borrowers that it is a function of the secondary market and at this time the marketplace is saturated with high balance loans at this time. So much fun.
“High-balance” loans are the super-conforming mortgages – those between $417,000 and $546,250 in San Diego County.
The lenders that have more than 10% of the super-conforming loans in their portfolio being sold to Fannie/Freddie have to charge an extra 2 points on any additional super-conforming mortgages. This will cause lenders to very carefully monitor how many super-conforming loans they generate.
Not only will this temper the availability of super-conforming loans, it’s going to drive borrowers away from banks and to mortgage brokers who can shop around to find the lenders who have openings.
Posted on Monday, January 19th, 2009 at 11:24 AM in Interest Rates/Loan Limits, Thinking of Buying? | 3 Comments » | 
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Well, if we see mortgage finance as a government-controlled operation (which is pretty much the case nowadays), I would say this type of behavior makes perfect sense. The government is dolling out subsidized (below market rate) loans. Therefore, it may decide that it is in the greater public interest to make four $150,000 subsidized loans in Oklahoma than to make a single $600,000 loan in San Diego.
Daniel | January 19th, 2009 at 1:03 pmOops… just realized that my example went over the $546K limit. Well, you get the idea anyways. Can’t blame the government for what it’s doing. Subsidizing many small loans is better than subsidizing few big loans (from a public policy perspective, not talking about profits or losses here).
Daniel | January 19th, 2009 at 1:10 pmYeah, if we’re going to subsidize it’s better to subsidize four people for the “price” of one. More importantly, this is being done by cutting back on subsidies to the high end (by charging a fee), rather than increasing subsidies to the low.
BDiego | January 20th, 2009 at 11:22 am