Freddie Mac Joins Fannie Mae with New Fee

Today Freddie Mac announced on its web site a 0.25% fee on mortgages it acquires under contracts with settlement dates on or after March 9.

Last week, Fannie Mae added a 0.25% up-front charge on all new mortages it buys or guarnatees. For every $100,000 loaned, this adds an extra $250 in fees to consumers who had good credit and didn't cause the sub-prime problems.

The Wall Street Journal reported:

Fannie said its new 0.25% fee will apply to loans sold by lenders to Fannie or placed into pools of guaranteed loans backing mortgage securities as of March 1, 2008. Lenders are likely to start adding that fee over the next few weeks because there is often a delay of several months between loan terms being offered to consumers and the sale of a completed loan to Fannie.

In a statement, Fannie said the new fee is needed "to ensure that what we charge aligns with the risk we bear." The National Association of Home Builders labeled the fee "a broad tax on homeownership." More than 40% of all mortgages outstanding are owned or guaranteed by Fannie or Freddie.

The fee is the latest in a series of moves by Fannie and Freddie that raise the cost of credit for some borrowers. Late last month, they imposed surcharges that affect mortgage borrowers who have credit scores below 680, on a standard scale of 300 to 850, and who are borrowing more than 70% of a property's value. For example, someone with a credit score of 650 would pay a surcharge of 1.25% of the loan amount for a mortgage to be sold to Fannie. On a $300,000 loan, that would mean extra fees of $3,750. The fee could be paid in cash or in the form of a higher interest rate than would normally apply.

Fannie also is raising down-payment requirements for loans it purchases or guarantees in places where house prices are falling, which by some measures is ost of the country. In these declining markets, lenders will need to cut by five percentage points the maximum percentage of the home's estimated value that can be financed. For instance, for types of loans that Fannie normally would allow to cover up to 100% of the estimated value, the ceiling now is 95% in declining markets.

Sadly, the actions of the high risk takers are now going to cost EVERYONE more to get a loan.