As we have discussed in the past, Fannie Mae has changed its Loan-Level Price Adjustments (LLPA) for 2011, and the prices will cause mortgage rates on many different kinds of mortgage to increase substantially.  Fannie Mae made the changes in response to a perceived increase in risk for mortgage lending.  A lot of these changes undoubtedly stem from the housing bubble and Fannie’s subsequent bailout by taxpayers.  Ultimately, the reasons for the increases are unimportant as they are now a fact of life.

In any case, the interest rates on fixed-rate mortgages and adjustable rate mortgages for those with loan-to-value (LTV) ratios over 70% will increase for most people, especially for those who have credit scores between 620-739 (click here to see the complete LLPA matrix with changes).  The increase in rates becomes more pronounced the lower a borrower’s credit is, and the additional risk hits can range from .125% to 3%!

The people who will be affected the most by the price increases are those with subordinate financing who are trying to refinance their mortgages.  People who have LTVs between 65-95% and combined LTVs between 80-97% will see price increases of anywhere from .25-1.5% dependent upon credit.  These price increases are in addition to the adjustments referenced in the previous paragraph, meaning that some people could end up several points more to refinance than they would have in the past.

Many lenders have already factored these changes into their pricing structures, and pretty much all (including Total Mortgage) will follow suit in the coming weeks.

You may also like:

Similar Posts:

Share