Fannie Mae announced last week it's new Loan Level Price Adjustments for (LLPA) for all loans that are Rate Locked on and after Monday January 17th. The revised Level Price Adjustments will also apply to conventional conforming loans locked prior to January 17th that request a rate lock extension with a new rate lock expiration date greater than February 18, 2011.
This means that if a Borrower is purchasing a home with a Conventional Mortgage that will be backed by Fannie Mae, and they have a Credit Score of 740 or higher, and are making a downpayment of 20% to 24.09% they will be assessed .25 points on their loan by Fannie Mae. That to me is what I would call over the top, and unreasonable.
A Borrower that has a Credit Score of 740 or higher is a great borrower, one that manages his/her money extremely well. Furthermore they are not making a minimal downpayment, they are putting down 20 to 24.09%. To penalize such a Borrower with points is something that I fail to understand.
This is one more reason why FHA continues to be the Loan Product of choice for most borrower.
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Info about the author:
George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308, gsouto@mccuemortgage.com, or visit my McCue Mortgage Homepage.
George -- Over the top? Unreasonable? Yes, that's putting it mildly. That classification of borrower should be rewarded not penalized. FHA all the way!!
George, I totally agree with Barbara. I can understand raising the bar from previous years, but I think Fannie Mae is focusing on the wrong group.
Spread the word. Once again we have another change that is going to cost the consumer more money.
George, That just STINKS! They should be getting credit for having a high score and putting down 20%. WHAT ARE THEY THINKING!!!!!!!
George: Thanks for the update. Obviously for those of us in the business, it's going to get tougher before it gets better!
George, you are closer to understanding this than many of us...what's the reasoning here...it almost sounds like they are over compensating for past business practices...like Marchel said; "What are they thinking?"
George,
I do not understand. Do they not want these borrowers? Are they trying to make FHA look even better. Also I've had borrowers that credit scores were in the 650 range that were told their scores were too low to qualify for a loan right now. looks like your chart would dispute that. :)
George all I can say is this year is going to be an interesting one on many levels.
Barbara, I agree. Someone with Credit Scores 740 and over have proven that they manage their finances well, and should be rewarded and not penalized.
Nick, that is what they are doing. They are still trying to dig out from their past mistakes, and have hit those with questionable credit pretty hard. So now they just have one group left to try to still get more money out of. What makes this even more unfair is that Fannie keeps all the money and Lenders get to deliver the news and collect the fees for them.
Marchel, they are only thinking of their financial situation, and recouping money to get their heads above water. As always it is those that did not create the problem that have to pay to correct it.
Kathy, well put.
Paul, I keep on saying that it has to turn back around, but they just keep on slamming us more and more.
Judi, they can get a Conventional Mortgage with Credit Scores as low as 620, but the problem is that many Lenders will not accept that even though the guidelines allow for it. Here in Connecticut Lenders have to also be concerned with the overall costs of a loan, we can't go over 5%. So if a borrower with 650 credit scores is putting down 20% he/she getting hit with 3 points from Fannie for the Credit Score. Now let's say that it is a multi-family house they are going to tack on another point. That puts you at 4 points without even factoring in the costs of doing the loan, so a Lender would have to deny that loan. Their are other reasons. Even if they can stay within the 5% total cost, a Lender might feel that there are other factors that make the loan to risky for them, so they will deny the loan even if it meets the guidelines.
Jennifer, let's hope that it starts being interesting in positive ways, not not negative ones like this change.
Thanks for the breakdown, George - this is very helpful. It is really going to make things more ridiculous.
Peggy, ridiculous is a good word to use to describe this.
Hey George -- I had no idea this was coming into effect. Wow, I just refinanced as a 740+ buyer with 20% down, so I'm guessing the lender would have bumped my rate by .25%? I can't imagine with still the lending issues that persist, that throwing more disincentives in the mix is somehow going to help.
Chris, the interest rate would have been the same, but you would have paid .25 points in additional Closing Costs to Fannie.
George, If we all wrote to our Congressmen, now Richard Blumenthal in Connecticut, it might help. All of the newbees is Congress know that they were elected to stop the nonsense, let's point this one out to them!
Should I just forward this, to them? Maybe, they will seek your advice before they do something this stupid, next time? Can we vote politicians out, when they do stupid things to hurt the consumer who voted them in?
George,
And look at a borrower with FICO at 720-739 and makes, say, 29% down payment, he has fork over .25 points. That's overdoing it I dare say.