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Mortgage Fees Increase Today. Are They as Bad as Reported?

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While fees are rising on some types of mortgages for people with outstanding credit, they'll still have access to better rates than those with low credit scores. (Shutterstock)
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Starting today, fees on certain types of mortgages could increase — especially for those with better credit scores.

But, the practical impact may not be as bad as is being publicly reported.

“I can’t tell you if that was the right thing or the wrong thing to do. It’s the thing that’s been done. But again, the better the credit, the better the interest rate still holds true. It also holds true on mortgage insurance,” said Chris Robson, a broker with Granville Home Loans.

(Disclosure: Darius Assemi, publisher of GV Wire, is the majority owner of Granville Home Loans.)

The difference between a high credit score of 780 versus a lower score of 630 is about 1.25% in the respective mortgage rates, Robson said.

New Rules Do Increase Certain Fees

Under the new rules implemented by the Federal Housing Finance Agency, mortgages guaranteed by two quasi-federal backers — Fannie Mae and Freddie Mac — those with a higher credit score will see a higher increase in the percentage of fees they pay than those with a lower score.

However, those percentages are still lower for those with better credit scores.

For example, ABC News said that for a 30-year loan on a $400,000 home with 25% down: borrowers with a credit score of 750 would see the fee percentage go from 0.250% to 0.375% — a $750 increase. A credit score of 650 would see the fee decrease, from 2.75% to 1.5%, a $3,750 saving.

Borrowers who use other financial institutions for mortgages, such as private lenders, will not be affected. During the pandemic, Fannie Mae and Freddie Mac backed more than 60% of the mortgage market.

The chart above shows the fee rate change for Fannie Mae and Freddie Mac loans. The red shows where rates have gone up. Loan to Value is the percentage of the home value the buyer is borrowing (the rest would be the down payment). FICO is the credit score. The bottom chart shows the new fee percentages. (Provided by Chris Robson)

FHFA Justifies Changes

The goal of the rate changes is “to expand opportunities for affordable homeownership,” Robson said.

Officially known as Loan Level Price Adjustments, FHFA says adjusting the rate is nothing new.

An FHFA spokesman explained the changes are necessary to prevent a future financial disaster.

“These changes better protect Fannie and Freddie from risk in today’s housing market and they protect taxpayers so they aren’t on the hook for another bailout,” FHFA spokesman Adam Russell said.

Russell said there hasn’t been a fee review “in quite some time and the housing market has changed quite substantially in recent years.”

Said Robson: “They are tinkered with on a regular basis. And in this case, it used to be up until these ones came in, 740 was the credit score you needed to get the best interest rate. It’s now become 780.”

There is also a distinction, Russell notes, between credit score and wealth.

“The priorities … include developing a pricing framework to maintain support for single-family purchase borrowers limited by weal​th or income (not low credit scores), while also ensuring a level playing field for large and small sellers,” Russell said.

FHFA pointed to an Urban Institute analysis, which said when you factor in private mortgage insurance — required for home purchases with less than a 20% down payment — “the apparent disconnection between risk and price in the table above disappears, with borrowers’ payments rising or falling according to the risk they pose.”

Tune in Tuesday

Robson will be a guest on GV Wire’s “Unfiltered” airing live Tuesday at 6 p.m. The show can be viewed on gvwire.com, youtube.com, and facebook.com.

Curiosity drives David Taub. The award-winning journalist might be shy, but feels mighty with a recorder in his hand. He doesn't see it his job to "hold public officials accountable," but does see it to provide readers (and voters) the information needed to make intelligent choices. Taub has been honored with several writing awards from the California News Publishers Association. He's just happy to have his stories read. Joining GV Wire in 2016, Taub covers politics, government and elections, mainly in the Fresno/Clovis area. He also writes columns about local eateries (Appetite for Fresno), pro wrestling (Off the Bottom Rope), and media (Media Man). Prior to joining the online news source, Taub worked as a radio producer for KMJ and PowerTalk 96.7 in Fresno. He also worked as an assignment editor for KCOY-TV in Santa Maria, California, and KSEE-TV in Fresno. He has also worked behind the scenes for several sports broadcasts, including the NCAA basketball tournament, and the Super Bowl. When not spending time with his family, Taub loves to officially score Fresno Grizzlies games. Growing up in the San Francisco Bay Area, Taub is a die-hard Giants and 49ers fan. He graduated from the University of Michigan with dual degrees in communications and political science. Go Blue! You can contact David at 559-492-4037 or at Send an Email