Operating under federal control and still burning through cash like it's going out of style, Fannie Mae and Freddie Mac have decided it's the perfect time to twist the knife in our backs and make it even more costly to get a home loan in this horrific lending environment. Effective April 1st, the dynamic duo plan to implement a new set of mandatory loan fees based on tighter down-payment and credit scoring rules.
Perfect timing guys! Just what our economy needs to pull itself out of this seemingly never-ending slump. And while I can understand their desperate need for additional revenue-generating fees, it just doesn't make any sense to penalize future buyers that come to the table with solid credit scores and sizable down payments for the sins of the past. That's not going to improve the situation for anyone but Fannie and Freddie.
Were you thinking about buying a condo this year? Make sure you plan on paying a three-quarter point add-on loan fee if you don't have at least a 25 percent down payment. And if you think your stellar credit score of 800 will save you from paying the fee, you're wrong. Your credit score won't mean a thing in this circumstance. Even buyers of traditional stand-alone homes with a FICO score of 720 will pay a mandatory three-quarter point fee at closing unless they can come up with a down payment of 30 percent or more.
According to Freddie Mac spokesman, Brad German, various combinations of credit risk and certain loans are defaulting at a rate of "four to eight times" the rate of other mortgages in the company's portfolio. He claims that these new rules are simply a way for them to better manage their portfolio and appropriately price riskier loans.
They're acting irrational in my opinion, and shooting themselves in the foot at the same time. How can Congress and the Obama administration claim with a straight face that they are working to stimulate housing while they stand by and let these organizations under federal control make such egregious mistakes?
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Fannie and Freddie are essentially pricing themselves out of the loan business. If this new policy is true, they are saying they don't want to finance a lot of loans. They just want to hoard the cash they got from the bailout.
What percentage of home buyers are ready to meet these types of qualifications? Not a lot.
Thanks for your comment Sleze...I agree with you 100 percent. It will certainly be interesting to see how this all plays out. Do you have any predictions?
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