Rising Mortgage Fees Push up Closing Costs

Borrowers who can’t come up with a sizable down payment and whose credit scores are below 680 are being squeezed in the mortgage market.

Fannie Mae and Freddie Mac are charging fees that are significantly higher than before to borrowers with the lower scores and with down payments of less than 30 percent. Many of these borrowers formerly were considered “prime” credit applicants.

Simultaneously, mortgage insurers MGIC and PMI Group are raising premiums on consumers who have low down payments and scores in the mid- to upper 600s.

Together these penalties total thousands of dollars, payable either at settlement or in higher interest rates."

This is outrageous," says Steven Moore, a mortgage broker with 1st Solution Mortgage in Falls Church. "

On a loan of $300,000 and with a credit score of 675 – which is not a bad score – and a 75 percent loan-to-value ratio (25 percent down payment), the cost is an additional $2,250 per loan."

Source: The Washington Post, Kenneth R. Harney (12/08/2007)