Freddie Mac, the second-largest provider of financing for U.S. residential mortgages, will add fees on riskier mortgages for a third time to cushion itself from the housing slump, Chief Executive Richard Syron said on Thursday.
The new fees include a 0.3 percentage point to lenders on all mortgages with loan-to-value ratios of 80 percent or more and credit scores less than 740. The government-chartered company also placed an additional charge on loans based on the risks they present, Syron said at the Reuters Housing Summit in New York.
"What we've been trying to do is become more risk-based" in pricing for Freddie Mac's guarantee program, he said.
Freddie Mac, which holds a charter from Congress to raise money for home loan lending, is boosting costs to lenders as it prepares for a housing market that it expects will continue to slump through 2008. Rising delinquencies on loans and declining bond values sent credit expenses soaring and led to a $2 billion loss in the third quarter.
The new fee is charged to lenders, who have the discretion of passing it on to borrowers, a spokesman said. If applied to a $250,000 30-year fixed-rate mortgage, monthly payments would rise by $11, he said.
Freddie Mac last year also installed a "market conditioning" fee of 0.25 percentage points that will take effect on March 9. Fannie Mae, the other publicly traded GSE, has also boosted fees.
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The new fees include a 0.3 percentage point to lenders on all mortgages with loan-to-value ratios of 80 percent or more and credit scores less than 740. The government-chartered company also placed an additional charge on loans based on the risks they present, Syron said at the Reuters Housing Summit in New York.
"What we've been trying to do is become more risk-based" in pricing for Freddie Mac's guarantee program, he said.
Freddie Mac, which holds a charter from Congress to raise money for home loan lending, is boosting costs to lenders as it prepares for a housing market that it expects will continue to slump through 2008. Rising delinquencies on loans and declining bond values sent credit expenses soaring and led to a $2 billion loss in the third quarter.
The new fee is charged to lenders, who have the discretion of passing it on to borrowers, a spokesman said. If applied to a $250,000 30-year fixed-rate mortgage, monthly payments would rise by $11, he said.
Freddie Mac last year also installed a "market conditioning" fee of 0.25 percentage points that will take effect on March 9. Fannie Mae, the other publicly traded GSE, has also boosted fees.
Story contributed by Reuters: Read More
