Is Fannie Mae Targeting “No Closing Cost” Loans?

The following as reported by Mortgage Daily.  The question is–will the limit of a 25 BP buyup on the guarantee fee limit the yield-spread-premium (YSP) or rebate on loans?  Any attempt to limit this amount would mean that the amount of rebate could fall short of paying for closing costs, which could hurt consumers, especially for purchases.  Why would they have this policy? It is clearly an attempt to limit prepayments and is a function of very low interest rates today, which is reflected in the high level of refinances. When rates go up, Fannie Mae will not have this problem. 

Sellers approved by the Federal National Mortgage Association that have excessive prepayment activity could be required to reimburse the secondary lender for the premiums they earned. Another policy update includes an increase in the fee to review condominium projects. Reimbursement may be requested for any premium that was paid on a loan that pays in full within 120 days of a whole-loan purchase or the date a mortgage-backed security was issued. The remediation is being established for when unusual prepayment behavior is identified for a seller. The update was discussed in Fannie Mae Selling Guide Announcement SEL-2012-02. The secondary lender noted that premium reimbursement is “not intended to be a blanket policy for all loans.” The selling guide was updated to establish standards for remediation in cases of unusual prepayment behavior and to determine the method for calculating premium recapture. Another update to the selling guide says that the maximum buyup of the guarantee fee is 25 basis points for fixed-rate loans and adjustable-rate loans with initial fixed-rate periods in excess of a year. Also covered in the bulletin was the base fee for a voluntary Project Eligibility Review Service, which is rising to $2,500 from $1,200 for condominium and co-op projects submitted on or after April 1. Fees could be higher for projects with commercial space. The additional cost per unit remains $30. There is no base fee for mandatory reviews. Maximum review fees are limited to $15,000. In addressing the higher fee, Fannie noted that the submissions for reviews have increased, while the projects have become more complex and the current environment has raised the level of research and analysis required. Source: Mortgage Daily

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2 Responses to Is Fannie Mae Targeting “No Closing Cost” Loans?

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