Fannie Mae to double lender charges

Fannie Mae on Tuesday outlined a new pricing policy aimed at helping the mortgage finance giant gird against increased credit risks and losses from home loans it buys from mortgage lenders, but the changes could end up squeezing out many borrowers.

Fannie Mae will double the fee it charges lenders and brokers to 0.50% from 0.25% beginning Oct. 1.

That fee will probably be passed on to borrowers, adding a quarter of a point to mortgage origination costs, said Steven Hops, president of the residential division of the California Mortgage Bankers Assn.

A quarter-point increase on a $200,000 loan will cost the borrower an additional $500.

However, a borrower can opt to take a slightly higher interest rate on a mortgage and avoid paying mortgage origination points.

Fannie Mae also revised its scale for points on loans, depending on the size of the down payment and the borrower’s credit score.

These changes will make it more expensive for borrowers who want to refinance and cash out some of their equity, experts said. And borrowers with lower credit scores will find it more costly to get a loan with smaller down payments.

In one example, a borrower with a credit score of 620 seeking to refinance a loan for 80% of the value of the home and take cash out would have to pay a total of 5% in fees -- and that’s not counting closing costs, said Pava J. Leyrer, president of Heritage National Mortgage Corp. in Grandville, Mich.

Under the revamped fee scale, even a borrower with a relatively high credit score of 720 looking to finance 80% of a home purchase faces a 0.25% fee.

Leyrer said the fee hikes will prove too high for many borrowers with low credit scores, who probably can’t afford the mounting charges. “These loans aren’t going to be done,” she said.

Would-be borrowers will need to beef up their credit scores and come up with larger down payments, Hops said.

“If you can put more money down, you will be rewarded by a better interest rate,” he said.