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Strategies & Market Trends : Galapagos Islands -- Ignore unavailable to you. Want to Upgrade?

To: Jorj X Mckie who wrote (3095)	9/27/2002 4:48:37 PM
From: MulhollandDrive	Read Replies (1) \| Respond to of 57110

i just saw this on FNM... lend less money??? guess not.. sfgate.com Higher refi fees ahead Kathleen Pender, Chronicle Staff Writer Thursday, September 26, 2002 -------------------------------------------------------------------------------- Many people who take cash out of their house when they refinance their mortgage will have to pay more starting Feb. 1. Fannie Mae, a quasi-government agency that buys mortgages from lenders and sets terms for much of the mortgage market, has discovered that people who borrow significantly more than their existing loan balance when they refinance -- called a cash-out refi -- default at a higher rate than people who don't. To make up for this added risk, Fannie Mae is increasing the fee it charges on certain cash-out refis. Lenders generally pass these fees on to borrowers, who can pay them up front or spread them out over the life of the loan. At most, the increase will cost an extra 0.5 percent of the loan amount, or $500 for each $100,000 borrowed. Spread over 30 years, that's about $3 per month (including interest) per $100,000 in loan amount, says Fannie Mae. During the past four or five years, Fannie Mae has increased the amount it will lend on refinanced mortgages to 90 percent of the home's value from 70 percent. Taking advantage of the increase and record low interest rates, homeowners are refinancing like crazy. About half are taking out cash out, and that's helping the economy. But Fannie Mae has discovered that people who borrow 20 percent or more of their remaining loan balance when they refinance are three times more likely to default than refinancers whose mortgage grows by 3 percent or less. Rather than lending these people less money, Fannie has decided to charge higher fees. On Feb. 1, Fannie will raise the fee on cash-out refinance mortgages secured by single-family homes with high loan-to-value ratios when the borrower is taking out more than 2 percent of the new loan balance or $2,000, whichever is less. The fee rises to 0.5 percent from zero on homes with LTV ratios of 70.01 to 75 percent, to 0.5 percent from 0.25 percent on homes with LTVs of 75.01 to 80 percent and to 0.75 percent from 0.5 percent on homes with LTVs of 80.01 to 85 percent. The fee on homes with LTVs of 85.05 to 90 percent remains at 0.75 percent. The higher fees also will apply to new loans that consolidate a first mortgage and subordinate liens, such as a second mortgage or home equity loan, if the subordinate lien wasn't used to buy the house. Tom Lund, senior vice president with Fannie Mae, says the fee increase is "minimal. We don't believe it will have any impact" on homeowners' ability to refinance. Kevin Clay, a San Carlos mortgage broker, says Fannie's new fees "are not going to have an incredible effect on access to credit." But they might cause consumers to choose different types of loans. For example, some people may be better off getting cash with a home equity loan instead of refinancing. When Fannie makes a change, most lenders follow.

To: Jorj X Mckie who wrote (3095)	9/27/2002 5:11:52 PM
From: mph	Read Replies (1) \| Respond to of 57110

you must have made somebody happy<g> Gotta keep away from Gloop's laughing gas when you're trading..................