Freddie Mac Increases Home Mortgage Fees for Some Borrowers

Freddie Mac (Federal Home Loan Mortgage Corporation) has recently announced on its website a hike for home mortgage rates. The increase will affect certain borrowers.

Just last month, another government-seized mortgage company, Fannie Mae, announced similar fee hikes for its home loan mortgage borrowers.

The succession of increases has prompted the National Association of Realtors and the National Association of Home Builders to raise objections. The two groups say that such actions discourage homeowners who are looking for mortgage refinancing.

Critics have also commented that the two companies’ decision to increase its fees has come in a most inopportune time — when the housing market has yet to recover from the economic slump, and when projections have been saying that this recovery would not be an easy task. Even though Freddie Mac and Fannie Mae do not deal directly with consumers, their actions have an impact on the fees that they have to pay.

However, Freddie Mac countered that there would be a greater risk of home mortgage defaults due to the low home prices. According to the company, there was a 30 percent price drop compared to last year’s rates, and that there were indicators that show that figures would further go down this year.

The fee hike will most probably affect home mortgage loan of the following characteristic:

• has low credit scores and down payment at the same time
• that which gives the borrower a choice to pay only the interest in the first years and delay repayments on the principal
• home mortgage refinancing loan that allow the borrower to cash out a portion of their home equity
• mortgages which invest in condominiums

For mortgages which reach up to $625,000, both Fannie Mae and Freddie Mac get or pledge loans initiated by lenders. The two mortgage companies also lower the cost they will have to pay for what they deem as higher risk loans. The surcharges would then be usually passed to consumers in the form of higher home mortgage loan rates or interest.

This entry was posted on Tuesday, February 3rd, 2009 at 3:11 am and is filed under Home Mortgage Loan. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.