Beware of your credit score, it may be costing you thousands of dollars when financing a home. Fannie mae and Freddie Mac, since being bailed out by the American taxpayer, have instituted "loan level pricing adjustments". LLPA's are increased costs paid by the consumer borrowing money from lenders. These fees are not profits that go to the lender's coffers, rather thousands of dollars that go directly to the institutions that own more than 50% of the mortgages in America.
The LLPA's range from .25% - 5% of the loan amount. What used to be considered a "good" credit score, now can cost a consumer $1, 2, 5, 10,000 extra in fees or a substancially higher interest rate for the duration of the loan. With all of the chnages in Washington regarding financial reform and transparency, it should be noted that these costly adjustments have gone under the radar and are non-transparent to the consumer. To look at the adjustments click here, this is a link to the LLPA matrix on the Fannie Mae site.
LLPA's do not stop at adjustments for credit only, there are adjustments for non-escrow, purpose of the loan, occupancy of the property and loan to value. These adjustments are accumulated. An example - A borrower with a 679 credit score on a 80% ltv would pay 2.5% X the loan amount additionally for a rate. The same borrower purcasing a 3 family house to occupy would pay an additional 1 point or 3.5 points total due to the number of units.
My advice is to monitor your credit score. If at any point it falls below 740, have a professional review it for recommendations which can lead to pushing your score higher over time.
Wednesday, May 26, 2010
Wednesday, May 19, 2010
Dodd Bill "Too Big to Fail"
Without getting political - how many have actually paid attention to what your representatives actually do in Washington DC? In our business, they are looking for 100% transperancy which is a good thing for the consumer. Here's my question, why are the guys trying to set the rules for transperancy doing it off the senate floor?
Better yet, why would the federal government come out with a compensation cap for the people that write loans and work with Joe Homebuyer, but not limit the big banks from their compensation when selling a loan after it closes (non-transparent to borrower)?
What I have read about the Dodd Financial Reform Bill is the purpose is to make things transparent and to avoid "too big to fail banks". Question of the day - what happens when small brokers and mid-size lenders are out of the business of mortgage loans? Answer - Banks are even Bigger to Fail!
From my 18 years in the business, I have never seen a bill that will make it more costly for the consumer. The federal government imposed the Home Valuation Code of Conduct. It did accomplish the random ordering of residential appraisals. It also allowed the "Too Big to Fail Banks" to open appraisal management companies which charge 50% more for the consumer's appraisal even though they pay the appraiser 50% less than they had earned previously. The small businessman (the appraiser) doing the work gets paid half and the large bank gets an extra 50% out of Joe Homebuyer.
Gotta love it when a plan comes together!
Any questions, call me - 860 305-1609
Better yet, why would the federal government come out with a compensation cap for the people that write loans and work with Joe Homebuyer, but not limit the big banks from their compensation when selling a loan after it closes (non-transparent to borrower)?
What I have read about the Dodd Financial Reform Bill is the purpose is to make things transparent and to avoid "too big to fail banks". Question of the day - what happens when small brokers and mid-size lenders are out of the business of mortgage loans? Answer - Banks are even Bigger to Fail!
From my 18 years in the business, I have never seen a bill that will make it more costly for the consumer. The federal government imposed the Home Valuation Code of Conduct. It did accomplish the random ordering of residential appraisals. It also allowed the "Too Big to Fail Banks" to open appraisal management companies which charge 50% more for the consumer's appraisal even though they pay the appraiser 50% less than they had earned previously. The small businessman (the appraiser) doing the work gets paid half and the large bank gets an extra 50% out of Joe Homebuyer.
Gotta love it when a plan comes together!
Any questions, call me - 860 305-1609
Monday, May 3, 2010
Four Goals to Determine Best Mortgage for YOU!
When purchasing or refinancing a home, your main goals should be to
1 – Get the lowest monthly payment to meet your financial objectives,
2 – Maximize your federal income tax benefit,
3 – Conserve as much capital as possible to meet your financial objectives, and
4 – Meet your risk tolerance.
The mortgage you select to use is a valuable financial instrument that should not be taken lightly. While considering the mortgage that is right for you, use the above to consider which will meet your short and long term strategies. Most people consider a mortgage a loan to buy a home. I can’t stress enough that this is a misconception!
It is said that purchasing a home may be the largest investment a person ever makes in their life. The financial instrument you choose – your mortgage – is a long term debt instrument that needs to fit into your financial plan.
1 – The lowest payment – There are many different mortgage programs that exist today. Not only are there terms ranging from 5 – 40 years. There are also different loan types to consider. There are stable fixed rate mortgages which the payment stays the same over the term of the loan. There are also mortgage programs that allow for interest only payments or loans that allow variable interest features.
Most people get hung up on what the lowest interest rate is without consideration of two very important details – the Annual Percentage Rate and the financial instrument product. My belief is the general public associates the lowest interest rate with the lowest monthly payment. Now, more than ever, your lowest monthly payment actually depends on your credit score, your down payment, your risk tolerance and your short and long term needs.
As an example a 5% fixed rate FHA mortgage actually has a higher payment than a 5.375% USDA Rural Development mortgage. Even when the down payment is 3.5% more for the FHA loan!
Another example would be a 10 year fixed interest rate is much lower than a 30 year fixed interest rate, however the monthly payment is close to double.
2 – Maximize your federal income tax benefit – This may be one of the most overlooked goals when considering the financing options available to you. One of the only tax deductions you may have at the end of the year are the property taxes you pay on a home and the interest associated with the financing for the home. Currently, mortgage insurance is tax deductible through 2011. Once that exception expires, it most likely will not be expanded, as the USA needs as much income as possible these days.
Make sure that you are maximizing this benefit of home ownership.
3 – Conserve as much capital as possible to meet your financial objectives – Most homebuyers and people looking to refinance a mortgage generally look to have the lowest monthly payment. A way to decrease the monthly payment is to invest more money in a home so that they are borrowing less. A simple analysis would suggest if your money is better spent being invested in the home or invested in paying off another debt. You should also consider is your money better spent pre-buying interest instead of an increased down payment.
Choosing to pre-buy interest would actually give you a lower payment by decreasing your interest payments each month for the life of the loan instead of decreasing the loan balance…and it actually conserves your capital that may be used to pay down other, higher yielding debt instruments or the conserved cash could be used to invest in a higher yielding asset.
4 – Meet your risk tolerance – The program that would give you the absolute lowest payment would be a variable rate mortgage that changes as frequently as possible. However, most people do not have the appetite for this much risk when it is tied to their biggest investment. Determining what your risk tolerance is generally will help lead you to the right program for you.
Risk tolerance does go farther than choosing a fixed or variable rate mortgage. If I asked you why you want a fixed rate mortgage, I would expect to hear because it’s “safe”. I agree, having the same, stable payment does lend itself to safety.
With safety being considered, do you think having a larger down payment invested in your home is a “safer” option because the payment will be a little lower? If you answered yes, I would disagree. Having capital in your home makes it a non-performing investment that is far more at risk because you do not have any control over your capital.
As a mortgage planner, my job is to help clients objectively determine their needs by considering these goals. If you would like to take advantage of a complimentary 30 minute needs analysis, please call me to schedule an appointment.
Vin Biscoglio
MLO#6954
860 305-1609
1 – Get the lowest monthly payment to meet your financial objectives,
2 – Maximize your federal income tax benefit,
3 – Conserve as much capital as possible to meet your financial objectives, and
4 – Meet your risk tolerance.
The mortgage you select to use is a valuable financial instrument that should not be taken lightly. While considering the mortgage that is right for you, use the above to consider which will meet your short and long term strategies. Most people consider a mortgage a loan to buy a home. I can’t stress enough that this is a misconception!
It is said that purchasing a home may be the largest investment a person ever makes in their life. The financial instrument you choose – your mortgage – is a long term debt instrument that needs to fit into your financial plan.
1 – The lowest payment – There are many different mortgage programs that exist today. Not only are there terms ranging from 5 – 40 years. There are also different loan types to consider. There are stable fixed rate mortgages which the payment stays the same over the term of the loan. There are also mortgage programs that allow for interest only payments or loans that allow variable interest features.
Most people get hung up on what the lowest interest rate is without consideration of two very important details – the Annual Percentage Rate and the financial instrument product. My belief is the general public associates the lowest interest rate with the lowest monthly payment. Now, more than ever, your lowest monthly payment actually depends on your credit score, your down payment, your risk tolerance and your short and long term needs.
As an example a 5% fixed rate FHA mortgage actually has a higher payment than a 5.375% USDA Rural Development mortgage. Even when the down payment is 3.5% more for the FHA loan!
Another example would be a 10 year fixed interest rate is much lower than a 30 year fixed interest rate, however the monthly payment is close to double.
2 – Maximize your federal income tax benefit – This may be one of the most overlooked goals when considering the financing options available to you. One of the only tax deductions you may have at the end of the year are the property taxes you pay on a home and the interest associated with the financing for the home. Currently, mortgage insurance is tax deductible through 2011. Once that exception expires, it most likely will not be expanded, as the USA needs as much income as possible these days.
Make sure that you are maximizing this benefit of home ownership.
3 – Conserve as much capital as possible to meet your financial objectives – Most homebuyers and people looking to refinance a mortgage generally look to have the lowest monthly payment. A way to decrease the monthly payment is to invest more money in a home so that they are borrowing less. A simple analysis would suggest if your money is better spent being invested in the home or invested in paying off another debt. You should also consider is your money better spent pre-buying interest instead of an increased down payment.
Choosing to pre-buy interest would actually give you a lower payment by decreasing your interest payments each month for the life of the loan instead of decreasing the loan balance…and it actually conserves your capital that may be used to pay down other, higher yielding debt instruments or the conserved cash could be used to invest in a higher yielding asset.
4 – Meet your risk tolerance – The program that would give you the absolute lowest payment would be a variable rate mortgage that changes as frequently as possible. However, most people do not have the appetite for this much risk when it is tied to their biggest investment. Determining what your risk tolerance is generally will help lead you to the right program for you.
Risk tolerance does go farther than choosing a fixed or variable rate mortgage. If I asked you why you want a fixed rate mortgage, I would expect to hear because it’s “safe”. I agree, having the same, stable payment does lend itself to safety.
With safety being considered, do you think having a larger down payment invested in your home is a “safer” option because the payment will be a little lower? If you answered yes, I would disagree. Having capital in your home makes it a non-performing investment that is far more at risk because you do not have any control over your capital.
As a mortgage planner, my job is to help clients objectively determine their needs by considering these goals. If you would like to take advantage of a complimentary 30 minute needs analysis, please call me to schedule an appointment.
Vin Biscoglio
MLO#6954
860 305-1609
Sunday, March 8, 2009
Deal or No Deal
Just One More Case … If you’ve ever seen the show “Deal or No Deal” you’ve likely noticed how common it is for contestants to be lured into taking additional risks to see if they can get through just one more case and keep their dream of big money alive. Sometimes it works out for them and they win big.
However, more times than not, the contestant pushes the envelope too far and ends up squandering a sure thing in the hopes of obtaining that alluring million-dollar prize. We have seen the same thing happen in the mortgage industry lately as clients continue to risk a sure thing in the hopes of saving $160 a month instead of the guaranteed $150 savings that is right in front of them. This desire to catch the market at its absolute lowest point and save that extra $10 a month can backfire and costs them thousands of dollars in potential savings. The truth is that none of us know “what case will be opened up next” and betting on the future can be a bit of a risky proposition considering the turbulent climate that surrounds us.
The reason I bring this is up is because my greatest fear is that you will miss out on the current opportunity that is before us. The turmoil in the economy has created a situation where we can likely reduce your monthly mortgage payment. To find out exactly how the numbers pencil out for you give me a call at 860 829-9600 x101. Reviewing your options and knowing what your specific situation looks like will help you make the best possible decision to help you and your family.
However, more times than not, the contestant pushes the envelope too far and ends up squandering a sure thing in the hopes of obtaining that alluring million-dollar prize. We have seen the same thing happen in the mortgage industry lately as clients continue to risk a sure thing in the hopes of saving $160 a month instead of the guaranteed $150 savings that is right in front of them. This desire to catch the market at its absolute lowest point and save that extra $10 a month can backfire and costs them thousands of dollars in potential savings. The truth is that none of us know “what case will be opened up next” and betting on the future can be a bit of a risky proposition considering the turbulent climate that surrounds us.
The reason I bring this is up is because my greatest fear is that you will miss out on the current opportunity that is before us. The turmoil in the economy has created a situation where we can likely reduce your monthly mortgage payment. To find out exactly how the numbers pencil out for you give me a call at 860 829-9600 x101. Reviewing your options and knowing what your specific situation looks like will help you make the best possible decision to help you and your family.
Tuesday, February 17, 2009
New Stimulus Signed into Law by Obama
Here is a great summary of what the new Stimulus means to first time buyers.
Stimulus Plan First-Time Homebuyer Tax Credit. The Stimulus Plan was signed into law by President Obama today. It contains a new tax credit for first-time homebuyers. Essentially, first-time homebuyers within certain income limits who purchase a home in 2009 before December 1, 2009 will receive a tax credit of up to $8,000.
The program is similar to the $7,500 tax credit which applied to home purchases made in 2008 after April 9. A comparison of the two credit programs is outlined below. While the Stimulus Plan was still being debated, the Senate version originally included a $15,000 tax credit for all homebuyers. To lower the cost of the Stimulus Plan, the final version of the Plan contained this smaller tax credit, and this tax credit is applicable only to first-time homebuyers.
To qualify as a first-time home buyer as defined in the programs, the purchaser (and the purchaser's spouse) may not have owned a home in the three years prior to the purchase date of the home. Single family homes qualify for the program. The home must be the primary residence.Both tax credits are subject to the same adjusted gross income limitations (full credit for AGI less than $75,000 single/$150,000 joint, phased out for AGI up to $95,000 single/ $170,000 joint). The amount for either credit is the lesser of 10% of the home purchase price or $7,500 or $8,000, as applicable.
While a purchaser still owns the home, the $7,500 credit must be repaid in equal payments over a period of 15 years, starting with the 2010 tax filing. The $8,000 credit will not need to be repaid. Again, the $7,500 credit needs to be repaid, while the $8,000 credit does not! Upon sale of the home, any portion of the $7,500 credit not yet repaid is due in full. No portion of the $8,000 credit is due upon sale of the home, if the home is owned for more than three years. If the home is sold within the first three years, the full amount of the credit is due upon sale. The $7,500 credit was not available to any purchaser utilizing state/local revenue bond money to help finance the home purchase. There is no such restriction on the $8,000 credit. Under both the $7,500 and the $8,000 programs, the credit will be claimed on the purchaser's income taxes. Any amount in excess of taxes owed will be refunded to the purchaser. Additional information about the tax credit can be found on the websites of the National Association of Realtors (www.realtor.org) and the National Association of Home Builders (www.nahb.org).
$8000 free to buy a new home! It's time to let your friends, family and co-workers know the great news!
Stimulus Plan First-Time Homebuyer Tax Credit. The Stimulus Plan was signed into law by President Obama today. It contains a new tax credit for first-time homebuyers. Essentially, first-time homebuyers within certain income limits who purchase a home in 2009 before December 1, 2009 will receive a tax credit of up to $8,000.
The program is similar to the $7,500 tax credit which applied to home purchases made in 2008 after April 9. A comparison of the two credit programs is outlined below. While the Stimulus Plan was still being debated, the Senate version originally included a $15,000 tax credit for all homebuyers. To lower the cost of the Stimulus Plan, the final version of the Plan contained this smaller tax credit, and this tax credit is applicable only to first-time homebuyers.
To qualify as a first-time home buyer as defined in the programs, the purchaser (and the purchaser's spouse) may not have owned a home in the three years prior to the purchase date of the home. Single family homes qualify for the program. The home must be the primary residence.Both tax credits are subject to the same adjusted gross income limitations (full credit for AGI less than $75,000 single/$150,000 joint, phased out for AGI up to $95,000 single/ $170,000 joint). The amount for either credit is the lesser of 10% of the home purchase price or $7,500 or $8,000, as applicable.
While a purchaser still owns the home, the $7,500 credit must be repaid in equal payments over a period of 15 years, starting with the 2010 tax filing. The $8,000 credit will not need to be repaid. Again, the $7,500 credit needs to be repaid, while the $8,000 credit does not! Upon sale of the home, any portion of the $7,500 credit not yet repaid is due in full. No portion of the $8,000 credit is due upon sale of the home, if the home is owned for more than three years. If the home is sold within the first three years, the full amount of the credit is due upon sale. The $7,500 credit was not available to any purchaser utilizing state/local revenue bond money to help finance the home purchase. There is no such restriction on the $8,000 credit. Under both the $7,500 and the $8,000 programs, the credit will be claimed on the purchaser's income taxes. Any amount in excess of taxes owed will be refunded to the purchaser. Additional information about the tax credit can be found on the websites of the National Association of Realtors (www.realtor.org) and the National Association of Home Builders (www.nahb.org).
$8000 free to buy a new home! It's time to let your friends, family and co-workers know the great news!
Thursday, January 29, 2009
Mortgage commentary from Mortgage News Daily website
Great commentary I saw today regarding interest rates and why they are where they are.
Thanks to Mortgage News Daily
Fed done. Nothing new, no unexpected events. The advancement of President Obama's Stimulus Plan and the possibility that a "Bad Bank" will be created to buy up toxic mortgage assets is encouraging for equity markets, but the feelings wont Be mutual for the TSY market. Increased issuances of gov. debt will drive up longer maturity yields and the TSY curve will steepen in the sell off. The Fed's continued involvement in the MBS market will provide stability and assist in the tightening of MBS/TSY spreads as Gov.notes and bond yields rise. Just remember that ALL markets are a day trader's delight right now and buying the dips and selling the rips is a popular trading strategy. In the mortgage origination world I would equate this to doing a ton of units with tight profit margins...in the long run you work harder but make a decent living.
I am feeling more encouraged about the prospects for tighter primary/secondary spreads. If you are a new reader I am referring to the difference between what rate borrowers are offered compared to how the MBS stack is behaving. On Tuesday and Wednesday we observed increased lock desk activity which led us to believe that an originator hedge was on the horizon (they lock their loans just like you do). Part of the reason for yesterday's early afternoon reprice alerts was this mortgage banker pipeline protection activity. Anyway what excites us this morning is the fact that the enlarged originator offering was concentrated in lower coupons like 4.0s and 4.5s. So while this could be attributed to less lock activity over the past 10 days...it could also mean that mortgage banks are starting to submit to the secondary markets requests for lower coupon production. Either way it is a positive for us and barring any TAPE BOMBS the road to reduced rates is slowly being paved. To respond to one readers comments....the light at the end of the tunnel doesn't seem to be a train heading our way! In regards to timing all we can do is keep our ears to the ground and listen to the whispers from lending ops centers.
Going back to the day trading environment. Yesterday the Fed re-iterated that "credit conditions for households and firms remain extremely tight" and we know that Bernanke's goal is to "facilitate the extension of credit to households and small businesses" ....the Fed will do this "facilitating" by keeping interest rates low. They will do so by purchasing moderating the Fed Funds rate, purchasing TSY debt, and providing a stable down in coupon bid in the MBS market. Anytime the MBS stack looks relatively weak it is an opportunity to buy on the "cheapness". Once those positions become relatively expensive...profit taking will occur and the Fed will step in to support us...and a cycle ensues.
The extent to which our rates get worse or better is a function of two factors. The first is how much the Fed buys (hopefully still in 4.0s and 4.5s) and the second is prepayment expectations. The latter is dependent on our lenders ability to pass along gains and borrower's feeling like they are finally getting the rates for which they have been patiently waiting. This price function has two dependant unknowns so making an assumption of when to expect lower mortgage rates will involve a great deal of variables. We do however appreciate the regular updates from our readers on the progression of the operational "beefing up" process.
Want more free info? Check out www.FindCTMortgage.com
Thanks to Mortgage News Daily
Fed done. Nothing new, no unexpected events. The advancement of President Obama's Stimulus Plan and the possibility that a "Bad Bank" will be created to buy up toxic mortgage assets is encouraging for equity markets, but the feelings wont Be mutual for the TSY market. Increased issuances of gov. debt will drive up longer maturity yields and the TSY curve will steepen in the sell off. The Fed's continued involvement in the MBS market will provide stability and assist in the tightening of MBS/TSY spreads as Gov.notes and bond yields rise. Just remember that ALL markets are a day trader's delight right now and buying the dips and selling the rips is a popular trading strategy. In the mortgage origination world I would equate this to doing a ton of units with tight profit margins...in the long run you work harder but make a decent living.
I am feeling more encouraged about the prospects for tighter primary/secondary spreads. If you are a new reader I am referring to the difference between what rate borrowers are offered compared to how the MBS stack is behaving. On Tuesday and Wednesday we observed increased lock desk activity which led us to believe that an originator hedge was on the horizon (they lock their loans just like you do). Part of the reason for yesterday's early afternoon reprice alerts was this mortgage banker pipeline protection activity. Anyway what excites us this morning is the fact that the enlarged originator offering was concentrated in lower coupons like 4.0s and 4.5s. So while this could be attributed to less lock activity over the past 10 days...it could also mean that mortgage banks are starting to submit to the secondary markets requests for lower coupon production. Either way it is a positive for us and barring any TAPE BOMBS the road to reduced rates is slowly being paved. To respond to one readers comments....the light at the end of the tunnel doesn't seem to be a train heading our way! In regards to timing all we can do is keep our ears to the ground and listen to the whispers from lending ops centers.
Going back to the day trading environment. Yesterday the Fed re-iterated that "credit conditions for households and firms remain extremely tight" and we know that Bernanke's goal is to "facilitate the extension of credit to households and small businesses" ....the Fed will do this "facilitating" by keeping interest rates low. They will do so by purchasing moderating the Fed Funds rate, purchasing TSY debt, and providing a stable down in coupon bid in the MBS market. Anytime the MBS stack looks relatively weak it is an opportunity to buy on the "cheapness". Once those positions become relatively expensive...profit taking will occur and the Fed will step in to support us...and a cycle ensues.
The extent to which our rates get worse or better is a function of two factors. The first is how much the Fed buys (hopefully still in 4.0s and 4.5s) and the second is prepayment expectations. The latter is dependent on our lenders ability to pass along gains and borrower's feeling like they are finally getting the rates for which they have been patiently waiting. This price function has two dependant unknowns so making an assumption of when to expect lower mortgage rates will involve a great deal of variables. We do however appreciate the regular updates from our readers on the progression of the operational "beefing up" process.
Want more free info? Check out www.FindCTMortgage.com
Tuesday, January 20, 2009
New Loan Pricing Adjustments Will Effect Many
I saw this on the Wall Street Journal -
Fannie, Freddie Strive to Serve Housing Market, Taxpayers "Fannie and Freddie over the past 18 months have gradually imposed larger surcharges on mortgage rates or fees for borrowers deemed high-risk. Real-estate brokers and home builders -- traditionally backers of Fannie and Freddie -- are up in arms. "It's appalling," Jerry Howard, chief executive of the National Association of Home Builders, said in an interview. "They're kicking people with relatively high credit scores out of the queue" for buying or refinancing homes."
"For a growing number of loans, Fannie and Freddie reduce the price they will pay (through a "loan level price adjustment") to compensate for what they see as higher risk characteristics. For instance, on a home-purchase loan involving a 20% cash down payment, a borrower with an excellent credit score of 740 or above could get a rate of about 4.75% with a 1% origination fee, said Lou Barnes, a mortgage banker in Boulder, Colo. But a borrower with a score below 680 would pay an additional fee of 2.5% of the loan amount or else accept a sharply higher interest rate."
"Fannie and Freddie had such surcharges in the past, but they were much smaller and affected a narrower range of borrowers."
"Burned by heavy losses in 2008, Fannie and Freddie have reverted to a focus on prime-quality borrowers with enough cash for sizable down payments. That has left a growing share of the market to loans insured by the Federal Housing Administration, which accepts borrowers with low credit scores and down payments of as little as 3.5%. While Fannie and Freddie now are criticized for being too strict in their credit standards, many critics fear the FHA is too lax and may face heavy losses eventually."
Fannie, Freddie Strive to Serve Housing Market, Taxpayers "Fannie and Freddie over the past 18 months have gradually imposed larger surcharges on mortgage rates or fees for borrowers deemed high-risk. Real-estate brokers and home builders -- traditionally backers of Fannie and Freddie -- are up in arms. "It's appalling," Jerry Howard, chief executive of the National Association of Home Builders, said in an interview. "They're kicking people with relatively high credit scores out of the queue" for buying or refinancing homes."
"For a growing number of loans, Fannie and Freddie reduce the price they will pay (through a "loan level price adjustment") to compensate for what they see as higher risk characteristics. For instance, on a home-purchase loan involving a 20% cash down payment, a borrower with an excellent credit score of 740 or above could get a rate of about 4.75% with a 1% origination fee, said Lou Barnes, a mortgage banker in Boulder, Colo. But a borrower with a score below 680 would pay an additional fee of 2.5% of the loan amount or else accept a sharply higher interest rate."
"Fannie and Freddie had such surcharges in the past, but they were much smaller and affected a narrower range of borrowers."
"Burned by heavy losses in 2008, Fannie and Freddie have reverted to a focus on prime-quality borrowers with enough cash for sizable down payments. That has left a growing share of the market to loans insured by the Federal Housing Administration, which accepts borrowers with low credit scores and down payments of as little as 3.5%. While Fannie and Freddie now are criticized for being too strict in their credit standards, many critics fear the FHA is too lax and may face heavy losses eventually."
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