The two Government Sponsored Enterprises (GSE) that buy most conventional mortgages ($417,000 max) have announced new fees going into effect on March 1st, 2008. Each new loan will carry a quarter percent fee: for a $400,000 loan, the borrower will pay $1,000.00 extra in closing costs! This amount will be added to the normal appraisal, title, credit report and origination fees now being collected.
Both companies are under pressure from losses incurred in the subprime sector. They anticipate the market condition to get tough for a while before things get better. 2008 may be worse than the year just ending with the market trying to figure out how to deal with the almost 2 million ARM loans due to reset.
There are many who are still waiting for the rates to continue to drop. That may well be the case as the Fed tries to keep the economy from getting into a recession. The third rates cut just announced today is part of the Fed's response, the question is how low must the rates go for the economy in general and the housing industry in particular in order to see some improvement?
HR-3915 MORTGAGE REFORM and ANTI-PREDATORY ACT OF 2007.
Congress is attempting to address the problems facing the mortgage industry. It is working on a bill that is designed to do away with current excesses and shortcomings . HR-3915 also known as the Mortgage Reform and Anti-Predatory Act of 2007 most likely will be enacted in 2008. May be we should change the name. This bill includes a Minimum Standard for Mortgages, something that is not really easy to explain.
In refinancing cases, HR-3915 applies a "tangible net benefit": how the refinancing will help the borrower. This is hard to measure at times: all refinances do not result in lower payments, yet they can benefit certain borrowers!
Another distinction is set between "qualified mortgages" and "qualified safe harbor mortgages". The classification may bring higher pricing for the so called "qualified mortgages" because they are the riskier ones. Will HR-3915 will end up penalizing marginal borrowers instead of helping them?
Stay tuned because there is a lot more to come. Fannie and Freedie are increasing their fees and Congress is offering some solutions. We only hope that the prescription does not kill the patient.
Do you want to know more about qualified mortgages, qualified safe harbor mortgages or any other topic discussed in this blog? Contact me at info@p2funding.com
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