Fannie Mae announced a new risk-based pricing model and additional mortgage delivery fees this week, adding to the cost of buying or refinancing a home.

Risk-based pricing was first introduced by Fannie Mae this past April. It added new, mandatory loan fees for high-risk borrowers while rewarding a small group of low-risk borrowers with fee credits.

In the updated model, even 720 credit scores with a 20 percent downpayment won’t protect mortgage applicants from the risk-based fees and they can range as high as 2.750 percent, depending on credit scores and loan-to-value. 

Fannie Mae will continue the practice of rewarding low-risk borrowers with fee credits.

Fannie Mae’s second pricing change involves the Adverse Market Delivery Charge and it is not risk-based — it applies to all applicants equally. 

First introduced in December 2007, Adverse Market Delivery Charges are mandatory surcharges on all conforming mortgages.  The fee was initially a quarter-percent.  It’s now doubled to 0.500 percent.

Combining risk-based pricing and delivery fees, mortgage applicants have two choices to pay them:

1. As a one-time fee, paid at closing, payable to the lender


2. As an interest rate increase, payable month-after-month to the lender

The one-time fee is calculated by multiplying to fee amount by the applicant’s loan size and dividing by 100.  The interest rate increase is calculated as a general rule, where each 0.500 percent in fees can be substituted for a 0.125 percent increase to a mortgage rate.

The fees become “official” October 1, 2008, but lenders are expected to deploy them much sooner.

Related posts:

• Mandatory FHA Loan Fees Increase For Some, Fall For Others
• Fannie Mae Halves One Of Its Mandatory Loan Fees
• Mandatory Loan Fees Keep Borrowers From Getting Their Absolute Lowest Rate
• Mortgage Rates Are Going Up — But Not For The Reason You’d Expect
• New Fannie Mae Loan Fees Target Condo Buyers, Among Others

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