Unfortunately, a move has been made at the federal level that will immediately impact rates. As a mortgage professional I feel it is my duty to let you know about the short time frame that is in play so that you can take advantage of the current rates before the increase. I have included a brief summary of the rule change that explains why rates will be rising
Why is this occurring? As directed by the Federal Housing Finance Agency (FHFA), pursuant to the Temporary Payroll Tax Cut continuation Act of 2001, Fannie Mae and Freddie Mac are required to increase the guarantee fee charged for all mortgages delivered on or after April 1, 2012 by 10 basis points. In the next few months, FHFA will further analyze whether additional guarantee fee increases are appropriate to ensure the new requirements of the law are being met.
What is a guarantee fee? It is a fee charged by mortgage-backed securities (MBS) providers such as Fannie Mae and Freddie Mac, to lenders for bundling, servicing, selling and reporting MBS to investors. The main component of the guarantee fee is charged to protect against credit-related losses in the mortgage portfolio. Think of it as insurance. Commonly known in the mortgage industry as "g-fee", this is a deduction in relation to the interest rate.
How does a 10 basis points increase in guarantee fee impact your loan? A 10 bps. Increase in g-fee effectively raises the interest rate to the borrower by 12.5 basis points (or 1/8th)