Fannie Mae and Freddie Mac’s risk-based home loan pricing will penalize consumers who don’t have sterling credit histories, and take a number of other factors about the loan into consideration before setting rates and fees, according to a report from Reuters. For example, consumers with credit scores below 740, or who make lower down payments, can expect to pay higher rates than other prospective homebuyers. In addition, those buying investment properties, condominiums or prefabricated homes can expect increased APRs as well.
“We encourage people to be more informed,” Dick Lepre, a senior loan officer with RPM Mortgage in San Francisco, told the news agency. “If they want the best rates they need to keep their credit score at or above 740. They must be vigilant about things such as medical collections which are often the result of confusion regarding medical co-payments.”
Under the new rules, some of the hardest-hit consumers will be those with credit scores under 620, the report said. For them, Fannie and Freddie may tack at least half a percentage point onto their loan. However, those taking out mortgage to finance investment properties may face rate increases of up to 1.75 percentage points.
Fannie and Freddie have a mandate from the federal government to cut the losses under which they currently operate, and are doing so by making a greater effort to securitize the loans they grant.