Archive for July 24th, 2008

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Freddie Mac’s SEC Filing : The 2 Sentences That Matter In A 1,394-Page Document


2008
07.24

Freddie Mac may be raising loan fees on all of its guaranteed mortgagesSometimes, the hardest part about news is knowing where to find it.

In its filing with the SEC last week, Freddie Mac stated that it will “pursue increases” to its middleman fee. This would likely make mortgages more expensive for every conforming borrower in the country.

The exact verbiage from the filing is extremely opaque and unless a person knew what things like “delivery fees” were, or “bulk and flow transactions”, he’d be inclined to skip right over the offending passage, tucked away on Page 72 in a paragraph labeled Business Outlook.

But, if we paraphrase the passage and simplify it for laypersons, it reads something like the following:

We didn’t charge enough fees in 2007 to account for the massive number of defaults. We don’t plan to make that mistake again in 2008.

Strangely, in the entire 1,394-page filing, this passage is the only mention of “future default costs” leading to more loan charges. In other words, it’s easy to see why this story didn’t get picked up by the major news outlets.

To the media, the major angle in Freddie Mac’s filing was that it registered to sell $10 billion worth of securities. For everyday Americans, though, the major story was a different one — mortgage fees may never be as low as they are today.

Therefore, if you know that you’ll need a new, conforming home loan soon — for either a home purchase or a refinance — consider moving up your timeframe. Whether rates rise or fall, it’s likely you’ll pay a more money to borrow money only because you waited.

The implied fee increase would be the third this fiscal year, following increases in December 2007 and in April 2008.