Mortgage Rates Still Battling Hangover From Last Week's Drama

Mortgage rates are still coping with the after-effects of last week’s surprise implementation of a new fee on refinances.  The fee in question is technically an LLPA (Loan-Leve-Price-Adjustment).  LLPAs are a normal part of the mortgage pricing process and they help lenders account for different risk factors (credit score, equity, occupancy, etc.).  The new refi LLPA is a bit different in that it’s in a sub-category known as an “adverse market fee.”  This is the agencies’ way of collecting extra money to compensate for extra risks–hopefully transitory ones.
None of the above would have been a big deal for the mortgage industry had the new fee been rolled out like every other fee: with plenty of advanced notice and in logical, palatable amount.  As it stands, it more than doubled the average fee currently going to ensure the GSEs’ ability to backstop the mortgage market.  It is also the first time they’ve reached so deeply and abruptly into lenders’ pockets (lenders will have to pay it on billions of dollars of loans that were already locked).  It’s no surprise to see lenders drastically adjust pricing in response….(read more)Forward this article via email:  Send a copy of this story to someone you know that may want to read it.
Source: mortgagenewsdaily.comNew feed