In order to maintain sustainable home-ownership, FNMA and FreddieMac have raised their lending standards again.  This means that in this deteriorating housing market, they are trying to only lend money to people that can pay it back!   The industry refers to your increasing interest rates as “loan level adjustments”, which equate to pricing hits and increased interest rates to certain loans.  The lower the level, the higher the interest rate.   A few of these characteristics will include: 

• A range of loan to value combos with certain credit score ranges

• Cash out refinances on certain FICO scores

• Two to four family houses 

In other words, the worse your FICO score is, the higher your rate will be for the above.  Here are some guidelines:

• If you are borrowing under 60% of the value of the home there will be no hit to your interest rate

• If your credit score is over 720, there will be no hit to your interest rate

• Any combination in between will have pricing adjustments  

FNMA and Freddie will be implementing these features as of June 1, 2008.  Guess what?? The lenders are all doing it as of NOW.  So, who is making the spread?  If you have a loan in the works now, check with your lender to see if you are affected by this and should lock in your rate now!

– Dale Siegel