Lenders Increasing Extension Fees

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.

Rate locks are for a specific amount of time and if a loan is not closed in time, the rate can either expire (typically repriced at worse case pricing) or be extended at an additional cost. The cost varies from lender to lender and the longer the lock period, the more the cost is to extend. This is why it’s crucial to make sure your loan is locked for a long enough time (to avoid an extension fee) and to promptly provide what ever may be requested by your lender.

We saw this the last time Fannie Mae increased the LLPA fees. Lenders are doing this to protect their bottom lines in the event they are not able to deliver the loan in time to Fannie to avoid the higher LLPA fees. Let’s hope the increased extension fees are truly “temporary”.