Freddie Hikes Fees

Freddie Mac is raising the delivery fees on certain mortgages it buys, citing the increased risk and costs associated with the loans.

In a bulletin to its single-family sellers and servicers on Monday, Freddie said it is increasing the delivery fee rates by 25 to 50 basis points on mortgages with a combination of certain credit scores and high loan-to-value ratios.

For example, on loans made to borrowers with credit scores of less than 620 and an LTV of 80% to 85%, the delivery fee will be 3.25%, up from 2.75%.

That increase is significant, said Steve Shuart, the director of secondary marketing at the Dallas mortgage lender Supreme Lending. Mortgages to borrowers with low credit scores are riskier, so it is not surprising to see such a big increase on those loans, he said. However, the changes will also affect borrowers with decent credit.

"For the most part, what it's going to end up doing is penalize borrowers in the mid-tier FICO range, wh[o] really aren't the problem," Shuart said.

On loans made to borrowers with credit scores of 740 or higher, with LTVs of 75% to 85%, or greater, a 0.25% fee will now be charged. Previously, no delivery fee was charged on loans with such characteristics.

Fees will also increase on loans made to borrowers with credit scores between 700 and 740 and LTVs of 70% to 85%, or greater.

Freddie also is adding a delivery fee for mortgages with secondary financing that have loan-to-value ratios of 65% or less and total loan-to-value ratios higher than 80% but no higher than 95%, while increasing other rates for mortgages with secondary financing and certain credit score-LTV combinations.

Freddie noted that an increase in delivery fees does not automatically mean borrowers' interest rates paid will go up. However, it is likely "these increases will have a nominal effect on consumer affordability," Freddie said.

Delivery fees have aroused the ire of many mortgage bankers in recent years; they lament that they must charge customers more in order to make money on a loan.

Shuart said the fee changes could drive more borrowers to seek Federal Housing Administration loans if rates on loans originated for Freddie and Fannie Mae rise too much.

"It's going to stifle their business and reduce the availability of loans that they have the opportunity to buy," he said. "Borrowers are going to be able to get a better deal on FHA, or it might just discourage people from going through the process" of getting a loan.

For now, Shuart said, he does not expect much of an impact on Supreme Lending's business, since it only sells loans to Fannie.

However, Fannie and Freddie usually take cues from one another on pricing, he said, so it is possible Fannie will soon follow suit.

Fannie Mae spokeswoman Amy Bonitatibus wrote in an e-mail: "We assess our pricing on an ongoing basis and make changes based on a variety of factors, including the risk profile of loans sold to us and other market data."

Freddie Mac's changes are to take effect March 1.

Banishing Blight

Getting rid of foreclosure-related blight in Baltimore has been an uphill battle. But the city is giving it another shot by offering a $5,000, forgivable loan to certain city employees who buy vacant properties.

The Vacants to Value initiative, announced this month by Mayor Stephanie Rawlings-Blake and Housing Commissioner Paul Graziano, aims to rehabilitate more than 1,000 vacant buildings using $70 million in private investments.

Among the initiative's efforts is a loan program for city police, firefighters and public school teachers who buy or rehabilitate vacant homes.

One hundred five-year, forgivable loans of $5,000 each will be granted to help buyers make down payments and pay closing costs, in addition to other homebuyer incentives totaling $1 million.

Graziano's agency is also creating a $1 million revolving loan fund for small developers and contractors.

To help reduce the sale time on vacant properties, the city designated a deputy commissioner for land resources and a new team of real estate marketing professionals to launch a website for marketing and selling properties.

It also adopted a uniform appraisal policy, a live auction process and a faster lien abatement process.

Baltimore estimates it has about 16,000 vacant buildings, roughly one-quarter of which the city owns.

It has been aggressive in its efforts to combat blight, even suing Wells Fargo & Co. on a claim that the San Francisco bank's lending practices led to foreclosures that have harmed the city. (The case has been dismissed twice. The city refiled in October.)

Facebook Foe

A St. Petersburg, Fla., woman recently discovered one of the downsides of having too many Facebook friends.

Melanie Beacham claims that a debt collection agency went too far when it tried to track her down by sending her friends and family messages on the popular social networking site, requesting that they have her call MarkOne Financial LLC, the Associated Press reported last week.

The Jacksonville, Fla., agency was seeking $362 on an unpaid car loan, the report said.

Beacham sued the debt collector in Pinellas County Court in August.

In a statement e-mailed to American Banker, MarkOne said: "The facts will demonstrate that the harassment allegations made against us are false and that we have and do operate within the spirit and scope of the law."

MarkOne added that its "policy is to only use Facebook to locate customers when the customer has a fully public profile and when the customer has not responded to MarkOne through conventional means. Our policy is to respect privacy disclosure requirements, and no negative or account information is shared with third parties."

The Federal Trade Commission has said that debt collectors are permitted by law to contact friends and relatives to find a debtor. They are not, however, allowed to discuss the specifics of a debt with anyone but the debtor and his or her spouse or attorney.

Facebook spokesman Andrew Noyes wrote in an e-mail: "Facebook policies prohibit any kind of threatening, intimidating or hateful contact from one user to another. We encourage people to report such behavior to us, only accept friend requests from people that they know and use privacy settings and our blocking feature to prevent unwanted contact."

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