Mortgage Lending Made Simple

By Jody Shenn

Aug. 5 (Bloomberg) — Fannie Mae, the largest U.S. mortgage- finance company, will raise a fee that the company charges lenders to buy their mortgages or guarantee home-loan securities, potentially boosting costs for borrowers.

Fannie Mae’s “adverse market delivery charge” introduced earlier this year for all mortgages that the company helps finance will rise to 0.50 percentage point on Oct. 1, from 0.25 percentage point, according to a letter to lenders posted on the Washington-based company’s Web site.

Government-chartered Fannie Mae and Freddie Mac have been tightening standards and raising fees since last year to boost revenues and limit losses amid the worst housing slump since the 1930s. The changes have made it harder for borrowers to get home financing, contributing to deeper price drops, said consultant David Lykken of Mortgage Banking Solutions in Austin, Texas.

“Everyone has to go to Fannie Mae and Freddie Mac right now, as there’s very few alternatives,” Lykken said in a telephone interview. The latest fee increase will “increase loan prices and the housing market is going to get worse.”

Fannie Mae also adjusted what it will pay for, or charge in bond guarantee fees on, mortgages with certain down payments, borrower credit scores or combinations of the two, according to the letter dated Aug. 4. The costs will fall for some loans to consumers with scores greater than 620, out of a possible 850, and loan-to-value ratios of more than 85 percent, while rising for some loans with down payments or home equity of between 15 percent and 25 percent.

Rising Delinquencies

Fannie Mae and Freddie Mac finance about 70 percent of new U.S. home loans. Analysts expect the companies to report net losses through the first quarter of 2009 as home-loan delinquencies rise to the highest on record.

Fannie Mae announced the adverse-market fee in December and put it into effect in March. McLean, Virginia-based Freddie Mac also began charging a similar 0.25 percentage point fee.

“We’re always looking at our fees in light of market developments,” Brad German, a Freddie Mac spokesman, said in a telephone interview today.

To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net.

If you enjoyed this post, please consider subscribing.  Subscribe in a reader or Subscribe by Email
We respect your privacy and your information will not be shared.