Mortgage Daily

Published On: February 2, 2009
Freddie Boosts FeesPost-settlement delivery increased on some programs

February 2, 2009

By staff

Freddie Mac has increased post-settlement delivery fees on various programs including loans secured by condominiums, cashout transactions and mortgages with higher risk characteristics. The move was made as distressed real estate markets are expected to worsen.Freddie said in a single-family seller-servicer bulletin Friday that continued deterioration in the real estate market is expected to push mortgage defaults higher for borrowers with lower credit scores and properties with high loan-to-values.

Freddie noted that the S&P/Case-Shiller 20-City Composite Index indicated that home prices sank 18 percent during the 12 months ended Nov. 30, 2008. Some areas saw annual declines of as much as 33 percent. A 1.8 percent decline from October to November in the Federal Housing Finance Agency’s Purchase-Only House Price Index was a record.

“All industry indicators point to these significant declines continuing through 2009,” the bulletin said.

In anticipation of further deterioration, fees charged for borrowers exceeding various combinations of LTV and DTI limits will be increased “to address the additional risk associated with some mortgages, particularly those that have been heavily impacted by the continued decline in home values.”

For example, borrowers with 700 credit scores and LTVs that don’t exceed 60 percent will see an 0.25 percent rebate, while a 60 percent LTV on a borrower with a credit score up to 659 would be assessed 50 BPS. A borrower with a credit score below 640 and an LTV above 70 percent would be assessed a 2.75 percent fee.

Cashout refinances will be assessed a fee of 25 BPS when the LTV exceeds 60 percent or the credit score is below 680. A combination of a credit score below 660 and an LTV above 80 percent will be assessed 300 BPS.

A new 75 basis point delivery fee will apply to certain condominium-unit mortgages with loan-to-value ratios higher than 75 percent. Home-possible, 15-year fixed-rate and government mortgages are exempted, however.

Initial-interest adjustable-rate mortgages with LTVs of 90 percent or less will be assessed a fee of 25 BPS. ARMs with LTVs above 90 percent will be assessed a 50 basis point fee.

The increased fees will be charged on loans sold under flow purchase contracts with settlement dates on or after April 1. Sellers that utilize the Freddie Mac Selling System and participate in the net price options will see the delivery fee in their monthly invoice from April 1 to April 30 — after which it will be deducted from the price paid.

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