This year new pricing adjustments are going to increase costs for borrowers seeking mortgage loans. There are two factors causing these fee increases:

1. G-fee Increase. The payroll tax cut extension deal, reached by Congress at the end of 2011, is being funded by Fannie Mae and Freddie Mac through an increase in guarantee fees (g-fees). Fannie Mae, Freddie Mac and other mortgage-backed securities (MBS) providers charge g-fees to lenders to help protect against credit-related losses in the mortgage portfolio, kind of like MBS insurance. This, in turn, helps lower the overall risk so lenders can offer home loans at lower interest rates to borrowers who have good, but not perfect, credit. Effective March 1, g-fees are being increased by at least 10 basis points to the lender, which will likely trickle down as higher costs or interest rates to the borrower.
2. LLPA Increase. Fannie Mae and Freddie Mac announced increases in Loan Level Price Adjustments (LLPA) for loans purchased after April 1. LLPAs are risk-based pricing fees that are calculated on a per-loan basis. Borrowers with credit scores between 680 and 760 and a loan-to-value (LTV) ratio of 80% or higher will see the highest LLPA increases.

While these g-fee and LLPA increases aren’t set to begin until March and April, many lenders are already putting these increases into effect on new Fannie Mae, Freddie Mac and FHA loan quotes. These changes can result in an increase of 1.5 to 2.0 points, or more, depending on your LTV and credit score. For example, if you need a $300,000 mortgage loan, you will see a $6,000 increase in the rate.

If you’re thinking of purchasing a new home or refinancing your existing home, now is the time to lock in your mortgage rate before all lenders price these fee increases into their rates.

Grandview Lending works with multiple investors, who are all on different timelines as to when they will price in these changes. The last time (within the last 2 years) an increase like this went into effect, Grandview Lending had a great advantage over banks as many of our investors waited until the last possible day to increase their fees.

So contact our mortgage specialists today at 317-255-0062 or 1-866-690-4920 to lock in your rate and beat these fee hikes.

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