Earlier this month, Fannie Mae changed the pricing on their My Community program across the board to all lenders by 1% increase to fee. If you’re using a My Community program and you’re transaction is not yet closed, you may want to check with your Loan Originator to make sure your lock is still valid.
I am currently working with a buyer who is purchasing a condo-conversion and the construction is taking longer than originally anticipated (this is not unusual, unfortunately). I originally locked in the loan well beyond the first close date on the purchase and sale agreement…when we blew past the original agreed to closing date, I did the longest extension possible for my client. Guess what? The lock will expire on July 2 and the condo will not be ready for closing (according to our most recent update) until around July 13th. Some lenders will allow you to continue to extend (for a fee) others only allow a one time extension, such is the case with this situation, and then you’re at “worse case” pricing. “Worse case” pricing means that if current pricing/rates is worse today, that’s your new rate. If rates are better today, the original (worse) rate, is your rate. “Worse case” pricing is pretty much as it sounds…WORSE!
We were using the My Community with a 100% loan to value 5/1 ARM using LPMI (lender paid mortgage insurance). It was a great option for my client. Having the loan repriced at “worse case” is not an option. Not only are we factoring in the 1% increase in fee, we are contending with the mortgage interest rate increases over this past month.
After reviewing the options with the buyer, we are electing to do an 80/20. The first mortgage will have the same interest rate as what our original lock with the My Community Mortgage did. The second mortgage has a slightly higher rate (as seconds do, especially with 100% ltv) so his payment is increasing a bit but not nearly as much has we stayed with My Community. It’s nice to have options when you have to “punt” in a situation like this.
All is all good…just not in My Community!