Fannie and Freddie raising mortgage loan lenders risk fees

Fannie and Freddie have raised risk fees for mortgage loan lenders, making it that much harder to buy a home. Image from Wikimedia Commons.

Fannie Mae and Freddie Mac have announced a raise in the risk fees they will charge mortgage loan lenders. The mortgage insurance houses are charging lenders more to buy the loans and sell them to investors. Higher costs for obtaining loans may be passed on to borrowers.

Fees charged to mortgage loan lenders to rise

Fannie Mae and Freddie Mac, the mortgage insurers that received billions from bailouts, are raising risk fees charged to mortgage loan lenders, according to USA Today. The fees aren’t being raised astronomically, but risk fees are now being assessed on mortgages lent to some of the least risky borrowers. The way Freddie and Fannie work is that when a bank or other loan company lends a mortgage to someone trying to get a loan, Freddie or Fannie buys the loan and guarantees lenders that they will receive payment and not lose money on the loan, should the borrower default. Then Freddie or Fannie can sell the loan to investors as an investment. The loan lender is charged a fee by the mortgage insurers for taking on the risk.

Fees to include least risky borrowers

Freddie and Fannie are now including fees on all mortgages, not just the risky ones. Previously, risk fees were not assessed on loans to borrowers who had credit scores of 711 or better and paid at least 20 percent down. From now on, anyone who borrows a mortgage loan without a credit score of 740 and 25 percent down is likely to warrant a risk fee assessed to the lender by Freddie and Fannie. These fees are likely to be passed on to consumers. The amounts will vary, depending on the credit score and amount of down payment of the borrower.

Least likely to affect wealthy borrowers

Those least likely to face risk fees are those who have perfect credit or who are well off enough to not worry about it. People trying to get a piece of the American dream of home ownership, whether it’s in Jackson, Mississippi, or in Scottsdale, Arizona, now have one more thing to contend with. Risk fees are expected to be incorporated into new mortgages nearly immediately.