When mortgages began to sour last Fall, Fannie Mae and Freddie Mac instituted “loan-level pricing adjustments”.

The concept is basic: For mortgage applicants with less-than-ideal credit profiles, mortgage pricing is adjusted to compensate for the added risks.

It’s still a conforming loan, but with adjustments.

Effective March 6, though, Fannie and Freddie’s definition of “high-risk” changed and the adjustments got much more expensive.

Some of the more impactful changes include:

• Regardless of credit score, cash out refinances above 75% loan-to-value are subject to price adjustments
• All LTVs greater than 60% are subject to price adjustments
• All 2-units will be adjusted by 0.500%, regardless of LTV
• All 3- and 4-units will be adjusted by 1.000%, regardless of LTV

If your mortgage application is a conforming loan destined for Fannie Mae or Freddie Mac, these adjustments may already be on your loan officer’s rate sheets but be sure to ask.

If the adjustments are built-in yet, consider whether your should lock your mortgage rate right away.

So, even though mortgage rates fell Wednesday, new Loan-Level Pricing Adjustments pushed the underlying payment higher for a lot of Americans.

This entry was posted on Thursday, March 13th, 2008 at 12:00 pm and is filed under Cincinnati Real Estate News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.