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| 30 Yr Fix |
6.05% |
-0.01% |
| 15 Yr Fix |
5.60% |
0.01% |
| 1 Yr ARM |
5.29% |
0.00% |
| 5/1 ARM |
5.67% |
-0.06% |
| 30 Yr Tres |
4.56% |
-0.06% |
| Fed Prime |
5.00% |
-0.25% |
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Fannie Mae Tightens Loan Criteria for Credit Scores
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Fannie Mae's Managing Director, Brian Faith, released a statement on Wednesday that gave notice that at least one of the two
government sponsored enterprises (GSEs) that play a major role in the nation's mortgage industry has decided it would be wise to protect its own interests.
Government lawmakers have increasingly focused on Fannie Mae and the other GSE, Freddie Mac, as a big part of efforts to ease the credit crunch. The Office of Federal Housing Enterprise Oversight (OFHEO) recently lifted the loan limit to make it possible for the GSEs to buy what are generally termed jumbo mortgages and reduced capital requirements to enable Freddie and Fannie to purchase more mortgages for their own portfolios.
The public statement by Faith was very general, saying in part:
"As Fannie Mae has expanded its mortgage guaranty business to serve the market's urgent need for stability, liquidity and affordability, the company has
undertaken a series of steps to protect borrowers, manage the increased credit risk in the market, and fortify the company's capital position. Among these steps, our company is continually assessing and establishing new pricing, eligibility and underwriting criteria for our business that more accurately reflects the current risks in the housing market and guards against the potential for foreclosure. These changes are incorporated into our underwriting system and include adjustments to credit score criteria, loan-to-value ratios, down payment requirements, accurate valuation practices, and consideration of markets where home prices may be falling."
"Given the current state of the mortgage and housing markets, it is critical for our company to conservatively manage our business and risks through
prudent pricing and underwriting, while providing sustainable liquidity to our lender customers and stability to the markets as part of our core mission. We will continue striving to responsibly strike that balance."
However, in a memo to its business partners, Fannie Mae got a bit more specific. Fannie Mae will now
require a minimum credit score of 580 for most loans that it buys although it says it will still acquire loans with lower score under certain very limited circumstances. This is not a major change as 94 percent of Fannie's business last year was in loans with scores over 620. It also announced some changes in the maximum loan-to-value of loans it would purchase.
Fannie also said it would lengthen the period needed for borrowers to re-establish their credit history after a foreclosure to five years from four years with, again, some exceptions for extenuating circumstances.
What is most interesting about all of this is that it sounds as though Fannie Mae is prepared to stand its ground and protect itself and its shareholders in the face of demands that it be all things to all forces in the current crisis.
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Comments (7)
| The government should stay out of things entirely if you ask me. Did you hear Fannie is removing it's portfolio cap entirely come March?! Standard and Poors thinks GSEs are posing a risk to the United States' AAA credit rating! |
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| Above Posted By:
John
| Sun, 20 Apr 2008 22:25:24 EST |
| Larry RubinoffGovernment's unwillingness to enforce necessary regulations is what brought us to this point. No one in this administration or the preceding 20 years was willing to acknowledge that value cannot be created out of thin air and then sold to unsuspecting customers. When things turn down, everyone rings their hands. Historically it has been necessary to protect the small investor from the rapaciousness of big investors, banks, savings and loans, highly-leveraged corporations. GREED has driven Wall Street to the wall, again, to join Humpty Dumpty. |
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| Above Posted By:
Jessica Fallon
| Wed, 9 Apr 2008 09:45:22 EST |
| What is this credit situation that let's every credit granting company use it's own scoring model on the credit score that is obtained from the credit reporting agencies? If each company has its own scoring model why do we need the credit reporting agencies? Why not destroy credit agency each company can determine what score it wish to use in granting credit to consumers any way? Its a waste of time and engeny to wait for the credit agency to generate a score and the credit you are requesting can be denied by the company if it so desire at it's wish. I see these actions as a waste of credit prudent and another way somebody to take money from every consumer. Why have laws if they are broken by business everyday actions. Might as well let Emron still exist, business owners can make up their own rules and policies anyway. And that is what Emron was doing and that is what the credit system is still doing. But who am I this country can tell who it pleases what is right and wrong, Jim Crow is still much alive, in credit, politic, religion, and any walk of life one decides on any turn? |
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| Above Posted By:
Mary
| Fri, 4 Apr 2008 07:17:39 EST |
| I am sick of this Mortgage mess. All I hear from the lender is false promises and more delays. I don't know anyone who has had there loan modified. Everyone I have asked was forclosed on or walked away from the house. Has anyone out there had there loan modified by Countrywide Bank? If you did please let me know. Every one says to walk away from the home. If I do that I will not qualify for a mortgage for several years. Even though the house is upside down $70,000.00. I still could not afford to move and pay $2000.00 a month for the same type home I am buying now. A lender recently said that the subprime interest rates tied to the MTA will continue to fall for 12 months and that is good for me because this month my interest rate dropped 0.282 just under 7%. It should continue to drop an average of 0.250 every month for 12 more months. If your current rate is 7% this month in 4 months it should be @ 6% and in 8 months @ 5% in 12 months down to 4%. I bet that when it hits 5% Lenders will be making all types of offers to lock you in at a 6% fixed rate loan. Don't do it stick to 5% with no fees. If they don't agree then go to another lender. There will be plenty of great opportunities comming up soon. Fannie and Freddie are not the only game in town. Once investors see affordable interest rate come down. These same investors will be aksing the people that stuck it out and kept making their payments to refi with them. The risk of a forclosure is very low with these people and the investors know it. The lenders would be wise to negotiate now before its to late. History shows us just how gready lenders are. This time they are going to loose even more. Citizens will not stand for there BS. Don't take my word for this just watch and see. In about 6 months the lenders will be screaming at the FEDS for more bail out money. The FEDS would be complete idiots if they give them more money this time. Maybe this time they will actually modify their loans or they will Bankrupt themselves. Countrywide received billions and all they did was slap the American people in the face. They didn't lower mortgage interest rates or modify loans. They have continued to raise rates and play games with their Loss Midigation and Loan Negotiation staff. Show me 1 loan modification and I will show you 100 forclosures today. In 6 months it will be a DIFFERNT STORY ! |
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| Above Posted By:
Douglas M. Thomson Sr.
| Fri, 4 Apr 2008 01:05:16 EST |
| The government MUST stay out of this. They tend to make matters worse. Fannie and Freddie have no answers and yes, they, as their private/public counterparts do, protect themselves, their executives, their salaries and the stockholders (maybe).
The government: 30 Billion Dollars to JP Morgan to steal a deal? Come on now, who is that helping, the homeowner/borrower?
Fannie/Freddie: Higher loan limits! Only to a select few in a select few areas. I guess if you don't live in one of those few areas (DC one of them) you shoulc not be able to get a loan over 417K at more reasonable rates. Moral: If you live in undervalued areas you have no business getting a larger mortgage.
There is an old saying, "if it is to be it is up to me". Wake up America, wake up mortgage industry, we need to wake up the bank executives/corporate America. They hold all the marbles....maybe give some back. |
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| Above Posted By:
Larry Rubinoff-TheMortgageCorner
| Thu, 3 Apr 2008 21:39:28 EST |
| why is Fannie Mae playing these games with a 580 mid-score when they know that the client will not be able ot even qualify for mortgage insurance. Are those requirements being relaxed also for the homeowner who is in trouble. Because I have had several and they cannot qualify for MI. |
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| Above Posted By:
Helen
| Thu, 3 Apr 2008 13:37:02 EST |
| "Protect the borrowers"....is that what they call the FAT price hits they are doling even to good borrowers based on credit scores???? |
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| Above Posted By:
Tim Rogge
| Thu, 3 Apr 2008 11:40:26 EST |
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