Expert: Jim Hoepf - 11/2/2009

Question
QUESTION: I have a client buying a home that is being charged a .75 pt on a detached condo that is FA approved. I understand that Fannie Mae no longer requires this. The lender is saying that Freddie Mac still does. I do not find anything that supports this and feel my clients are being charged unfairly. Can you shed some light on this?

ANSWER: Donna,

I have done my homework and Fannie Mae does have a .75 Loan Level Price Adjustment for Condo's over 75% loan to value.  Normally this is factored into the interest rate and figured into the yield spread premium.  What rate is your client being charged and how long ago was the rate locked?  I think your lender may be trying to make a little extra money and putting the blame on Freddie/Fannie.

---------- FOLLOW-UP ----------

QUESTION: The home is a detached condo and according to what I find Fannie Mae has waived the .75 as of September on detached condo's, but according to the lender Freddie Mac does charge it. They locked at 5% and 3/pt. September 8th or so, then the lender came back a week later and said they needed .75pt due to being a condo. They are putting 20% down. The lender stated they are not sure who they will sell the loan to so they need to charge the extra points. I think this is unfair and unnecessary. What are your thoughts?

ANSWER: Donna,

I would assume they know who the loan is going through....the automated underwriting should have already been done and at that point they have an idea where its going.  If they are paying 3 pts to get this loan, they are already being taken advantage of.  Industry standards are roughly 1 pt in origination fees.  The .75 should have been in the rate or the original points they were paying.

---------- FOLLOW-UP ----------

QUESTION: Sorry... I did a typo error and the original points I meant to put was 3/4 not 3 points. They did close at 5% and 1.25 points. The lender gave them a 1/4 point discount. The original loan lock was 5% and 3/4 point which the lender said was pricing for a detached home not a condo (even though it was a detached condo) and added the additional points after the lock. This was a direct lender and my clients just got tired of fighting about the additional points even though we showed them the Fannie Mae guidelines. From what I take from your E Mail, the lender knows who they are selling to early in the process. This lender acted like they had no idea if it would be Freddie Mac or Fannie Mae so they needed to cover their risk by charging the additional points. Is there anyway to find out after the closing who they sold the loan to?

Answer
Donna,

I would be very surprised if they didn't know up front.  Loans are run through automated underwriting either through Fannie Mae or Freddie Mac.  Its very unlikely than ran it through one and then sold to the other.  

After your client gets their first statement, they can go to the Fannie Mae or Freddie Mac web site and look up their property address to see if they own it.  It will take at least until the first statement for that information to be available.

Let me know if you need anything else.