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Whas’ Up with Loans

March 17, 2011

Last week I attended a WCR monthly meeting and lo and behold, Carole Rodoni, was back.  For those of you who do not know this powerhouse, then check out her consulting firm Bamboo Consulting, Inc.   Carole has worked in the real estate industry for years and literally, I think, knows where all the bodies are buried and where they will be buried.  Her prognosis is that “at the end of the day” we will be OK.   We all know that unemployment is still the big question and that inflation will come creeping back once the federal government pulls back with stimulus measures.  Consumers will drive the recovery but it will continue to be painful for the next two years.  If consumers are back in the fray, watch out for new loan orgination fees.

Freddie Mac and Fannie Mae and that also means FHA, will be assessing a “risk aversion fee” based on loan term, loan to value ratio and credit score; this will range from .25 points to1.25 points….. depending.   The LLPA, loan level price adjustments, program began in April, 2008, as a measure to reduce risk.  OK, now it seems that even with high FICO scores and large down payment there is a risk so even those exemplary borrowers are not exempt.  Risk is a fact of life but now borrowers get to pay for it.  Where are these fees going? To the lenders to reduce losses and the trend will continue until we get out of this mess.   Lenders can start these programs effective 4/1/2011 but most have already started as of 1/15/2011.  The bottom line is that it is getting more expensive to obtain a loan if a borrower’s credit is damaged.  This could mean 740 FICO score or more with 25% down.  If you are getting a loan, make sure your credit is really good before you start the process and keep saving what you can for a down payment.

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