SoCal Mortgage Blog

Fannie Mae and Freddie Mac have been instructed to start collecting the new, higher guarantee fees effective April 1, 2012.  This is a result of the payroll tax cut extension bill passed by Congress on Dec. 23rd.

However, mortgage applicants will notice new fees appearing sooner than that. This is because loans that land with Fannie or Freddie can take 75 days or more to get there.

Here's why.

First, your loan is locked. Then, your loan is underwritten, closed, and funded. For a purchase or a refinance, this process can range from 10 days to 60 days or longer, depending on the traits of your particular transaction.  However our average transaction is 35 days.

Then, post-closing, your mortgage must be prepared for delivery to Fannie Mae or Freddie Mac, a process which typically requires a re-review of your complete loan file and a quality control audit to minimize long-term lender liability.

This post-closing/audit process can be a 1-day thing, or it can take weeks.

Only after the audit is complete will your loan be delivered to Fannie Mae or Freddie Mac, which is why mortgage applicants everywhere will start paying the new, 10 basis point guarantee fee well in advance of the April 1, 2012 deadline -- it takes time to get a loan to the secondary mortgage markets.

What does this mean in dollars to you?

For example on a $400,000.00 mortgage the cost will increase about $1,200.00.  This can be paid in for real dollars or in the forms of a higher interest rate.  So in short, interest rates will be going up as a new mortgage "payroll tax" fees will be levied on applicants starting no later than late-January.

Rates are already super-low. Get locked and exempt yourself from new fees. It's extra savings to your mortgage.