Fannie, Freddie charge borrowers for feds' tax cut
By Kathleen Pender, SF Chronicle/SF Gate
Sunday, January 15, 2012
 
Congress' idea to launder a tax increase through Fannie Mae and Freddie Mac is already costing borrowers.
Just before Christmas break, lawmakers decided to pay for a two-month  extension of the payroll tax cut and federal unemployment benefits by  raising the guarantee fee that Fannie and Freddie charge on loans they  buy by at least 0.1 of a percentage point. The fee normally stays with  Fannie and Freddie (now majority-owned by taxpayers) to compensate them  for the risk they take on loans they buy and guarantee.
The extra 0.1 of a percentage point, however, will to be sent  directly to the U.S. Treasury to pay for the payroll tax cut and  unemployment benefits.
A fee of 0.1 of a percentage point will be added to all loans that  Fannie and Freddie buy for almost 10 years - from April 1 to Oct. 1,  2021. Because it can take months to close a loan and deliver it to  Fannie and Freddie, many lenders have already added the fee into their  pricing for new loans. (It will not affect existing loans.)
Wells Fargo began adding the fee Wednesday on loans going to Fannie  and Freddie. Chase added it Jan. 3. Bank of America would not disclose  whether it has added it yet.
If you have already applied for a new loan and locked in a rate  before the increase took effect, you won't be affected unless you cannot  close the loan before the rate lock expires.
Wells spokesman Tom Goyda says the fee will add a bit less than one-eighth of a percentage point to a 30-year, fixed-rate loan.
Because mortgage rates are rounded to the nearest eighth, count on it adding one-eighth of a percent.
That doesn't sound like much, but on a $400,000 loan it would add about $228 a year in mortgage payments.
Lower rate, higher fees
Borrowers usually have the option of paying a lower interest rate in  exchange for higher up-front fees, often called points. To reduce the  rate on a typical 30-year, fixed-rate loan by one-eighth, a borrower  would usually pay about 0.4 percent of the loan balance in extra fees  today, says mortgage broker Mark Leaver of Loanlane Residential. On a  $400,000 loan, that's about $1,600 extra in fees.
To maintain parity on government loans, Congress also raised the  annual mortgage insurance premium on Federal Housing Administration  loans by 0.1 of a percentage point. The FHA has not said when or how it  will implement that increase.
Although these increases do not apply to jumbo loans and loans that  are not government guaranteed, they will probably raise the cost of all  mortgages, which are typically priced at some premium to Fannie/Freddie  loans.
Consumers won't see these fees broken out because they are factored  in to the final price of the loan, says Keith Gumbinger, a vice  president with HSH Associates.
Most borrowers won't even notice them now because interest rates are  so low. Freddie Mac reported that mortgage rates slipped to record lows  for the week ending Thursday. The average cost of a 30-year fixed-rate  mortgage was 3.89 percent interest with 0.7 of a point, down from 3.91  percent the previous week and 4.71 percent this time last year.
The agency that regulates Fannie and Freddie said it will announce  early this year whether it will increase the fee by more than 0.1 of a  percentage point to meet the requirements of the new law.
More housing developments
It was a busy week for Fannie and Freddie.
On Tuesday, Fannie Chief Executive Officer Michael Williams said he  will step down as soon as a replacement can be found. Williams worked at  Fannie since 1991 and became CEO in April 2009.
In October, Freddie's CEO, Charles Haldeman Jr., said he will resign within the next year.
The government seized Fannie and Freddie in October 2008. Since then,  their regulator, the Federal Housing Finance Agency, has been calling  most of the shots.
Edward DeMarco, the agency's acting head, has been criticized by some  for taking his mandate to protect taxpayers from mortgage losses too  seriously and not doing enough to help struggling homeowners and the  housing industry.
On Tuesday, 28 House Democrats from California urged President [http://www.sfgate.com/barack-obama/] Obama to name a permanent director to the agency while Congress is in recess.  Obama made other recess appointments, including naming Richard Cordray  to head the Consumer Financial Protection Bureau.
"FHFA has consistently and erroneously interpreted its mandate far  too narrowly and as such has failed to take adequate action to help  homeowners," the lawmakers wrote in a letter to Obama. "Installing a  permanent director of the FHFA will allow the FHFA to move forward to  make key decisions that will help keep families in their homes and  improve our economy."
Underwater assistance
Fannie and Freddie have not exactly ignored struggling homeowners.  They recently expanded the Home Affordable Refinance Program to let  qualified homeowners who are current on their mortgage and owe more than  their homes are worth refinance into a new mortgage no matter how  deeply underwater they are.
And Wednesday, Fannie told banks that service its loans they could  let unemployed borrowers make no or partial mortgage payments for up to  six months without Fannie's approval or up to 12 moths with its  approval. Freddie made a similar announcement Jan. 6.
Both the refinance and forbearance program can help only homeowners  whose mortgages are backed by Fannie or Freddie. In the Bay Area, that  leaves a lot of homeowners out of luck because they took out loans that  were too large to be sold to Fannie and Freddie.
 
Net Worth runs Tuesdays, Thursdays and Sundays. E-mail Kathleen Pender at [mailto:kpender@sfchronicle.com] kpender@sfchronicle.com.

Read more: [http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/01/14/BURB1MP878.DTL#ixzz1je15wIsn] http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/01/14/BURB1MP878.DTL#ixzz1je15wIsn

Fannie, Freddie charge borrowers for feds' tax cut
By Kathleen Pender, SF Chronicle/SF Gate
Sunday, January 15, 2012
 
Congress' idea to launder a tax increase through Fannie Mae and Freddie Mac is already costing borrowers.
Just before Christmas break, lawmakers decided to pay for a two-month  extension of the payroll tax cut and federal unemployment benefits by  raising the guarantee fee that Fannie and Freddie charge on loans they  buy by at least 0.1 of a percentage point. The fee normally stays with  Fannie and Freddie (now majority-owned by taxpayers) to compensate them  for the risk they take on loans they buy and guarantee.
The extra 0.1 of a percentage point, however, will to be sent  directly to the U.S. Treasury to pay for the payroll tax cut and  unemployment benefits.
A fee of 0.1 of a percentage point will be added to all loans that  Fannie and Freddie buy for almost 10 years - from April 1 to Oct. 1,  2021. Because it can take months to close a loan and deliver it to  Fannie and Freddie, many lenders have already added the fee into their  pricing for new loans. (It will not affect existing loans.)
Wells Fargo began adding the fee Wednesday on loans going to Fannie  and Freddie. Chase added it Jan. 3. Bank of America would not disclose  whether it has added it yet.
If you have already applied for a new loan and locked in a rate  before the increase took effect, you won't be affected unless you cannot  close the loan before the rate lock expires.
Wells spokesman Tom Goyda says the fee will add a bit less than one-eighth of a percentage point to a 30-year, fixed-rate loan.
Because mortgage rates are rounded to the nearest eighth, count on it adding one-eighth of a percent.
That doesn't sound like much, but on a $400,000 loan it would add about $228 a year in mortgage payments.
Lower rate, higher fees
Borrowers usually have the option of paying a lower interest rate in  exchange for higher up-front fees, often called points. To reduce the  rate on a typical 30-year, fixed-rate loan by one-eighth, a borrower  would usually pay about 0.4 percent of the loan balance in extra fees  today, says mortgage broker Mark Leaver of Loanlane Residential. On a  $400,000 loan, that's about $1,600 extra in fees.
To maintain parity on government loans, Congress also raised the  annual mortgage insurance premium on Federal Housing Administration  loans by 0.1 of a percentage point. The FHA has not said when or how it  will implement that increase.
Although these increases do not apply to jumbo loans and loans that  are not government guaranteed, they will probably raise the cost of all  mortgages, which are typically priced at some premium to Fannie/Freddie  loans.
Consumers won't see these fees broken out because they are factored  in to the final price of the loan, says Keith Gumbinger, a vice  president with HSH Associates.
Most borrowers won't even notice them now because interest rates are  so low. Freddie Mac reported that mortgage rates slipped to record lows  for the week ending Thursday. The average cost of a 30-year fixed-rate  mortgage was 3.89 percent interest with 0.7 of a point, down from 3.91  percent the previous week and 4.71 percent this time last year.
The agency that regulates Fannie and Freddie said it will announce  early this year whether it will increase the fee by more than 0.1 of a  percentage point to meet the requirements of the new law.
More housing developments
It was a busy week for Fannie and Freddie.
On Tuesday, Fannie Chief Executive Officer Michael Williams said he  will step down as soon as a replacement can be found. Williams worked at  Fannie since 1991 and became CEO in April 2009.
In October, Freddie's CEO, Charles Haldeman Jr., said he will resign within the next year.
The government seized Fannie and Freddie in October 2008. Since then,  their regulator, the Federal Housing Finance Agency, has been calling  most of the shots.
Edward DeMarco, the agency's acting head, has been criticized by some  for taking his mandate to protect taxpayers from mortgage losses too  seriously and not doing enough to help struggling homeowners and the  housing industry.
On Tuesday, 28 House Democrats from California urged President [http://www.sfgate.com/barack-obama/] Obama to name a permanent director to the agency while Congress is in recess.  Obama made other recess appointments, including naming Richard Cordray  to head the Consumer Financial Protection Bureau.
"FHFA has consistently and erroneously interpreted its mandate far  too narrowly and as such has failed to take adequate action to help  homeowners," the lawmakers wrote in a letter to Obama. "Installing a  permanent director of the FHFA will allow the FHFA to move forward to  make key decisions that will help keep families in their homes and  improve our economy."
Underwater assistance
Fannie and Freddie have not exactly ignored struggling homeowners.  They recently expanded the Home Affordable Refinance Program to let  qualified homeowners who are current on their mortgage and owe more than  their homes are worth refinance into a new mortgage no matter how  deeply underwater they are.
And Wednesday, Fannie told banks that service its loans they could  let unemployed borrowers make no or partial mortgage payments for up to  six months without Fannie's approval or up to 12 moths with its  approval. Freddie made a similar announcement Jan. 6.
Both the refinance and forbearance program can help only homeowners  whose mortgages are backed by Fannie or Freddie. In the Bay Area, that  leaves a lot of homeowners out of luck because they took out loans that  were too large to be sold to Fannie and Freddie.
 
Net Worth runs Tuesdays, Thursdays and Sundays. E-mail Kathleen Pender at [mailto:kpender@sfchronicle.com] kpender@sfchronicle.com.

Read more: [http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/01/14/BURB1MP878.DTL#ixzz1je15wIsn] http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/01/14/BURB1MP878.DTL#ixzz1je15wIsn