Earlier this year, as part of the "Mortgage Meltdown", Fannie Mae and Freddie Mac instituted what they call Loan Level Price Adjustments. The basic concept is that borrowers getting a mortgage may be subjected to a higher cost depending on their credit score and loan-to-value(LTV). The lower the credit score and/or the higher the LTV, the more it would cost to borrower money. This cost could be passed along in the form of higher closing costs and/or higher interest rates. They broke down credit scores into 20 point ranges and LTV into 5% ranges. Depending on which box you fall into on the chart, that determined the adjustment.
After re-evaluating these changes, additional updates took affect ealier this summer, again increasing the expense of riskier individuals to secure a mortgage. Here we go again...
As of November 1st, another round of adjustments will become effective. This is actually good news in that the change was initially scheduled to take effect October 1st. With the new changes, most people with credit score below 720 or less than 25% down will pay more for their mortgage.
Any buyers that are on the fence need to get off now and buy a home. Even if the house prices have not bottomed out yet, any savings gained from a lower sales price could easily be lost due to a higher rate.
Good luck and good selling.
Karl,
Thanks for the update! I don't know how any originator can survive in this market without becoming a consumate learner. The regulations are changing faster than ever...
It does seem like I have spent more time learning and teaching than I have originated loans in the past year. The only constant right now is change.