Mortgage costs rising for some

Government-sponsored mortgage finance giants Fannie Mae and Freddie Mac are introducing or raising fees on certain mortgages they buy to reflect their higher risk of default.

Freddie Mac is primarily setting new fees for mortgages made to people who borrow more than 70% of their property’s value and have credit scores below 680.

The new charges range from 0.75% to 2% depending on credit scores, according to a bulletin by the company. The changes take effect March 1.

In a letter on its website, Freddie Mac said its changes were “in response to continuing volatility and turmoil in the mortgage market, including the deteriorating performance of higher-risk mortgage products.”

The McLean, Va.-based company also said it would lower by five percentage points the maximum loan-to-value ratios on the mortgages it buys that are made in markets with falling home prices.

Washington-based Fannie Mae announced its higher pricing Nov. 6. The fees also apply to loans the companies package into guaranteed securities.

Fannie Mae and Freddie Mac own or guarantee about 40% of the $11.5 trillion in U.S. residential-mortgage debt outstanding.

Under Freddie Mac’s new fee system, a lender selling the company a mortgage made to a borrower with a credit score of 675 who made less than a 30% down payment on a $300,000 home would pay an additional $2,250 in charges.

Lenders will pass the new fees on to consumers, said Dan Arrigoni, head of Minneapolis-based US Bancorp’s mortgage unit.

“What we have to pay gets passed on; no question about it,” Arrigoni said. Rick Aneshansel, chief financial officer for the unit, said the changes would affect more than 10% of mortgages acquired by the two government-sponsored entities.

The higher fees follow an 81% drop over the last year in the volume of mortgage securities issued without guarantees from the government-sponsored enterprises.