Freddie and Fannie are at it again!

Fannie Mae and Freddie Mac are at it once again! While I understand the need for some of the changes (very few actually) made over the last several years many have become a hinderance to a housing recovery. The pendulum has swung from very little to way too much. Ok! OK! I'll get to the point.....

I am talking about the changes to "Risk Based Pricing." RBP for short. RBP has been around for quite some time now. I am not opposed to this. Basically what RBP does is reward those who are deemed less risky borrowers and charge a premium for those who are deemd more credit risky. Think of the difference between a 640 credit score and a 740 credit score. I remember when I was a Broker many years ago, one of my lenders sent out a matrix that showed the statistical likelyhood of someone defaulting for every 20 points up or down in credit score. Credit score is just one part of RBP.

Few people know that just about every bank out there gets their money to lend from these two government agencies so they set the guidelines, parameters, and matrixes. What they are proposing now to the RBP scenario could put a big damper on any momentum or recovery in the housing market. Basically what they are proposing is that anyone who is getting a loan is a RISK!!!!

For example: You have a buyer with an 800 credit score who is going to put 25% down. Great credit, good money down. Seems like a low risk borrower. Well not according to what may come out. This borrower would be charged what is called a .25% hit or add on thereby increasing their interest rate.

Another example: If you have a borrower who has a 679 credit score and is going to put down the same amount? They will be charged a 2.25% add on/ hit!!!!!

Condo? .75% hit/add on Adverse Market? .25% hit.

If this happens it could push good buyers into rentals. Stay aware of what is happening and stay active. What happens in the lending arena could not only affect my livelyhood and the service I provide to my clients but it will trickle down in to the Realtor arena as well.