New, Mandatory Loan Fees For All Conforming Mortgages- GEE Fee to hurt interest rates

New g-fees threaten low mortgage ratesBeginning as soon as next week, new, mandatory mortgage fees will push mortgage rates higher throughout Pleasanton and nationwide. Fannie Mae and Freddie Mac are raising their respective “guarantee fees”.

GEE Fee and Interest Rates

Guarantee fees are fees that mortgage-backed securities providers charge to lenders for mortgage-related services including the bundling, selling and reporting of mortgage-backed bonds.

Guarantee fees are also used to insure providers against credit-related losses.

As announced by the Federal Housing Finance Agency, effective for all conforming loans delivered to Fannie Mae or Freddie Mac, beginning November 1, 2012, guarantee fees will be raised by an average of 10 basis points per loan.

Conforming mortgages already average close to 30 basis points in guarantee fee per loan built in.

This is the second time this year that the FHFA has raised guarantee fees, with the most recent increase translating into an approximate 50-basis point worsening in consumer mortgage pricing. That today’s home buyers and refinancing households will soon pay higher loan closing costs as a result.

To use a real-life example, Freddie Mac reported that the average 30-year fixed rate mortgage was 3.55% nationwide this week for borrowers willing to pay an accompanying 0.7 discount points.

Once the new g-fee is implemented, the discount points change :

  • Prior to guarantee fee increase : 3.55% with 0.7 discount points
  • Post guarantee fee increase : 3.55% with 1.2 discount points

Post-increase, in other words, an identical Freddie Mac loan requires an extra half-point to get to closing, or $500 in additional closing costs per $100,000 borrowed.

These fees will soon appear on rate sheets, if they haven’t already.

Lenders know that it can take up to 60 days to lock a loan, approve it, fund it, then package it for delivery. Loans locked today, therefore, will likely be delivered to Fannie Mae or Freddie Mac after the November 1, 2012 deadline. As a result, mortgage pricing will soon include the effects of the g-fees.

I’m Here to Help You With Your Purchase or Refinance Rate Lock

I love to work with my Bay Area readers that find my information on the Mortgage and Housing Market helpful in your decision making process. As a Mortgage Planner at Vintage Mortgage Group in Pleasanton I am in a unique position to help you capitalize on historically low interest rates in 2012. Contact me below today to help you with your purchase or refinance.

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