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January 2008
Freddie Mac continually evaluates the Mortgages that we purchase and the applicable delivery fees. In response to continuing volatility and turmoil in the mortgage market, including the deteriorating performance of higher-risk mortgage products, we are expanding our use of risk-based pricing by adding fees based on Indicator Score and loan-to-value ratio. We are also increasing our delivery fees for certain Mortgages with increased risks.
In addition, we are reminding Sellers of our existing appraisal standards and underwriting expectations related to maximum financing in declining markets. We are also revising our requirements for calculations of maximum financing concessions.
DELIVERY FEES
Changes to Exhibit 19, Postsettlement Delivery Fees
Effective date: March 1, 2008
The new Indicator Score/Loan-to-Value delivery fee and all changes to delivery fee rates announced in this Bulletin will become effective for Mortgages with Settlement Dates on or after March 1, 2008.
To ensure that our delivery fees are appropriately aligned with associated risk, we are:
- Introducing a new delivery fee based on a Mortgage Indicator Score and loan-to-value (LTV) ratio
- Revising the delivery fee rate structure for Mortgages with 80/10/10 secondary financing and Home Possible® Mortgages with secondary financing
- Increasing the delivery fee rates for
- Mortgages secured by 2-unit Primary Residences with LTV ratios greater than 75% and less than or equal to 90%
- Mortgages subject to CS/LTV (A-minus) delivery fees
- Mortgages secured by Manufactured Homes
- Balloon/Reset Mortgages with LTV ratios greater than 90%
- Reducing the incentive for purchase transaction Home Possible Mortgages where the Borrower income does not exceed 80% of the applicable area median income
Indicator Score and loan-to-value ratio
The new delivery fee will apply to Mortgages with loan-to-value ratios greater than 70% as follows:
| Indicator Score | Delivery Fee Rate | | Below 620 | 2.00% | | 620-639 | 1.75% | | 640-659 | 1.25% | | 660-679 | 0.75% |
The new Indicator Score/Loan-to-value delivery fee will not apply to the following Mortgages:
- 15-year fixed-rate Mortgages
- Home Possible Mortgages
- Section 184 Native American Mortgages
- Assumable Section 502 Guaranteed Rural Housing Mortgages sold with recourse
- FHA/VA Mortgages
- A-minus Mortgages, which are Mortgages that meet the requirements described in Guide Chapter C33, other Caution Mortgages, and Non-Loan Prospector® Mortgages that are subject to the CS/LTV (A-minus) fees, as set forth on Exhibit 19
This information above was released and written by Patricia J. McClung, Vice President in Customer Outreach and Offerings Deployment with Freddie Mac.
In reviewing this information and everything it contains, it all leads back to one thing; Credit Worthiness.For many years individuals and families with poor credit history were receiving "creative financing" options with many mortgage and financial institutions.For many years now, the economy has been surviving on what I like to call "fake money".Most everyone who is considered wealthy in today's world, is wealthy on paper and that is all their wealth consists of.The housing boom we all experienced was created on wealth and credit based on paper.It was not created on true wealth or credit representation.I personally believe the housing boom we seen in recent years only postponed the inevitable scenarios we are experiencing today.No longer can people gauge their wealth or their credit based on what an 8 1/2 x 11 page paper tells them.We all need to get back to the basics of credit, debt and finances and quit trying to run a race in a financially fast paced world with all of our heads down.Do not expect this latest "Delivery Fee" to be the last we hear of from the financial world in hopes of bouncing back from years of avoidance and ignorance.
As always, if you do not get caught up in the financially fast paced world we live in and focus on understanding the basics of credit, debt and finances, you will be ahead of the race – long term- and you will be MAKING OPPORTUNITY REALITY!
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