The Federal Housing Finance Agency (FHFA) recently announced increases for their loan Guarantee Fees which will affect most San Diego mortgage interest rates.
The FHFA is a federal agency that regulates Fannie Mae and Freddie Mac and sets policy with regards to loans made to people across the country, including those that are working with San Diego Mortgage Brokers.
This increase in pricing, which is an average of 10 basis points in the guarantee fees, took effect on September 10, 2012. This is not really an increase in rates, but the net effect of the new pricing structure will be to increase effective mortgage rates in San Diego and across the country.
If you would like to receive a free mortgage rate quote, to see where rates currently stand, click HERE.
What is a Guarantee Fee?
A guarantee fee pays for features in a loan that increase the security of that loan to an eventual purchaser of the loan. It is similar to getting insurance on the loan. Unfortunately, every increase of 10 basis points in G-fees typically raises San Diego interest rates on your average mortgage by about .125% or .5 Points in cost.
In a news release dated August 31, 2012, the FHFA explained that “the changes to g-fee pricing represent a step toward encouraging greater participation in the mortgage market by private firms” which is a goal proposed by FHFA’s “Strategic Plan for Enterprise Conservatorships”.
The acting director of FHFA, Edward DeMarco feels that “These changes will move Fannie Mae and Freddie Mac pricing closer to the level one might expect to see if mortgage credit risk was borne solely by private capital”.
This fee increase will help price the loans more in line with privately backed mortgage securities and will hopefully encourage more participation in the market by privately backed lenders.
So what does that mean for consumers who are looking for a San Diego Purchase Loan and wish to work with a San Diego Mortgage Broker? In short, it means that San Diego mortgage rates will have an additional pricing adjustment.
While rates have been at historical lows, this action in effect cancels out much of the Federal Reserve’s recent efforts with QE3 (Quantitative Easing 3) to hold mortgage rates at a lower and more attractive level to stimulate home purchases and refinances.
As your San Diego mortgage broker I am still able to help you continue to obtain the best interest rates in San Diego and loan for your needs. These policies are in effect now, and they affect most new interest rate lock-ins on new transactions.
Lenders have already laid out guidelines on the new pricing structure and how it will affect locks and relocks on loans in the upcoming months. Rates will go up as a result of this new pricing structure, but how much they rise is going to be dependent upon your particular circumstances. Lock extension on loans already in process will also be affected by this new policy and could cause your rate to increase even though it was locked.
The increased G-fee pricing will affect rates on all conforming products including Agency High Balance, San Diego HARP 2.0 loans like the DU Refi plus or LP Relief Refi, and HomePath loans. This change does not apply to Government loans like San Diego FHA and VA loans or San Diego Jumbo loans.
As your premier choice for a San Diego mortgage, I would like to show you how these new fees affect your purchase decision. Mortgage rates fluctuate constantly and we have been blessed with great rates. Even with this new policy in place, I can help find you the lowest San Diego interest rate.
The key is to act now. If you’ve been thinking about getting pre-approved for a San Diego Purchase Loan or refinance, contact me today or submit for a free quote and let’s get started on looking at your options!