New home closing in April? Less than 20% down? Might want to lock now.....

[sgip]

The FHFA announced Monday, December 16th, sharp increases in the Agencies Loan Level Price Adjustments (LLPA's). Those buyers with big down payments and high FICO scores need not read further. Those with mid level scores (700-740) or are putting less down (90% LTV to 76% LTV) should be aware of these upcoming charges. Here's an general example of what costs are increasing:

2013 LLPA's for a 10% down Condo purchase with a 739 FICO.

1) .25 for Adverse Market Conditions.
2) .75 for Condo purchases with less than 25% down.
3) .50 for FICO score between 720 and 740.

1.50 total.

2014 LLPA's for same terms, with loan delivering in April 2014

1) -0- for Adverse Market Conditions (deleted)
2) .75 for Condo purchases with less than 25% down
3) 1.25 for FICO scores between 720 and 740.

2.00 total.

How do LLPA's impact price? Assume a 30 fixed rate at 4.50% without points or LLPA's (base pricing). A borrower must either pay 2.0 points to get 4.50%, or assuming also that for every .125% in rate you pay .50 in fee, raise the rate from 4.50% to 5.0% to get that same -0- point priced loan.

How harsh are the LLPA's? Here's an example.

3 unit purchase, 25% down, 710 FICO.

A) 1.0 point for Units.
B) 1.75 points for Non-Owner
C) 1.50 points for 710 FICO.

4.25 points added in fee for an investment property purchase. SPICY!!! >


Link to article:

http://www.mortgagenewsdaily.com/12172013_mortgage_rates_to_take_big_hit_from_fee_hikes.asp

With loan limits being reduced (FHA now, GSE's in late 2014), pricing hits increasing (GSE's) and tighter underwriting (Qualified Mortgage - QM) don't be surprised to start looking at paying points or ARM products for best available rates.

My .02c

 

[freedomcm]

Why blame the Fs?  Why should the gov't not be able to 'shape' its portfolio?  The banks have 'shaped' their portfolio by basically not lending their own capital, no?

Is there some 'right' to a gov't insured loan that I am unaware of?

If you have bad credit, particularly if you want to be a landlord, you should pay the freight!

 

[OpenSky]

 

[test]

The banks are for profit institutions and have a responsibility to their shareholders to maximize returns.  As many of you have never worked in financial services, let me explain:

Just because someone needs a loan does not mean they deserve one.  A person with limited ability to repay (GMI income borderline for DTI ratio), a history of non-payment (B or lower credit) and low likelihood of being able to repay (limited assets) is not deserving of a loan.  They are a bad credit risk.

They have done nothing to show that they are a worthy credit risk to anyone lending them money - whether its an individual or a company.  Would you lend several hundred thousand of your own money to someone in your family that didn't make any money, had terrible credit and no savings?  So why should a company's shareholders eat that loss when loans made to those individuals go bad?  In the past, banks would make loans that were borderline because they could recoup losses with fees and the health of their portfolio would still be OK. 


In the current state, they are extremely restricted with the number of fees that can be charged.  Which is why credit has tightened to such an extent - only the less risky applicants are accepted since the banks are not selling loans to FNMA and FNMC as much as they are keeping these loans on their balance sheets.  No one wants to have a bunch of non-performing assets, so you are not seeing as many questionable loans made.

Loans sold to FNMA and FNMC have what is called a repurchase agreement and a warrant.  Those items force banks to guarantee that the loan is good and to buy them back if they go bad, despite the fact that FNMA and FNMC reviewed the loans prior to purchase and knew what they were buying.  FNMA and FMNC have successfully convinced everyone in the district that they didn't know what they were doing, despite recording higher profits per employee than any companies in the country.

The CFPB guidance right now is to tighten up lending standards to meet some arbitrary percentages set by the government.  What are those numbers based on? Some lawyers' estimate of how many folks would still qualify for loans vs. the old lending percentages?

Here's the kicker:  How long until the government wants those standards reduced back to the old standards to increase lending to customers with questionable credit risk again?  Since you are not aware - this has already happened once under the Clinton administration via their HUD policies and it is very likely to happen again once the job market improves. Why? Because politicians are counting votes for the next election.  Influencing public policy to garner votes for a candidate is a proven tactic used by politicians at all levels of government.

So the government can force companies to lose money on bad loans by limiting their ability to charge fees to recoup their losses as well as forcing them to buy the loan back when it goes bad in the future (the FNMA and FNMC lawsuits on behalf of their new owner). Yet they can also force companies to make bad loans by changing their requirements (changing HUD policies or CFPB ratios) to force lending to questionable borrowers or for limited value collateral.

It must be nice to have it both ways and accept no responsibility for the impact of those decisions.

More mindless drivel from a big government lover.

Posts: 2420 (14.070 per day)

Get a life.

 

[sgip]

Looks like the first thing Mel Watt is going to do after taking.over the FHFA will be to postpone the fee increases. An early Chrismas present indeed.