I’m receiving notices from a couple of the lenders we work with that they are temporarily increasing rate lock extension fees due to Fannie Mae’s increased guarantee fees (LLPA) that will hit us in 2014. An extension fee is an additional cost that may be charged in order to keep a rate locked when the rate lock is expiring.
UPDATE: DECEMBER 23, 2013: Incoming Director of the FHFA, Mel Watts has announced that he will delay the increase to conforming price adjustments (aka LLPA or guarantee fees).
This week Fannie Mae revealed conforming price adjustments (LLPA) which will increase the cost for mortgage rates in 2014. This complied with the Fed beginning to pull back on their bond buying program will certainly cause mortgage rates to trend higher.
Earlier this week, a real estate agent emailed me this question regarding Fannie Mae HomePath mortgages:
I have a client looking at a HomePath home in King County. It’s listed at $470,000 and she wants to put down 5%. Is that possible? I had the impression that HomePath still has to conform to standards on loans and the limit would be 417,000.
Here’s my reply:
The Federal Housing Financing Agency (FHFA) who oversees Fannie Mae and Freddie Mac, confirmed that conforming loan limits will remain unchanged from 2013 to 2014. This is great news as a few weeks ago, officials were indicating that we could see conforming loan limits reduced in early 2014. This means that a single family 1-unit residence in the greater Seattle area has a conforming loan limit of $506,000. Loan amounts above conforming limits are considered “jumbo” or non-conforming.
This weekend, Fannie Mae will be updating DU (Desktop Underwriter) to reflect the new higher minimum down payment requirements. I’ve written about that here.
This new underwriting guideline will also impact Fannie Mae HomePath mortgages, bringing the minimum down payment from 3% for owner occupied purchases to 5% down.
Reuters reports that Denise Dunckel, a spokes person for the FHFA recently stated “a gradual reduction in loan limits is an appropriate and effective approach to reducing taxpayer’s mortgage risk exposure”.
With conforming mortgage rates trending higher largely due to the end of Fed’s support of keeping mortgage rates at QE artificially sweet low levels, we’re seeing less difference between conforming mortgage rates and non-conforming mortgage rates (aka Jumbo mortgages). In most Washington state counties, a jumbo mortgage is any loan over $417,000 (for a single family dwelling). In the greater Seattle area (King, Pierce and Snohomish counties) we have “conforming high balance” mortgages which will allow loan amounts from $417,001 to $506,000 before it’s considered a non-conforming (or jumbo) mortgage. Here’s a link to 2013 Washington State conforming loan limits.