During the past week or so I have had one borrower after another calling me to ask why they were unable to receive the “lowest rates in history.” Each caller was referring to the news media reports from multiple news agencies telling people how low their rates were. Much of this unintentionally misleads.
Research on the true story going on behind the scenes with Fannie Mae and Freddie Mac shows a different story. I question why Fannie and Freddie — two taxpayer/government owned entities — are not being held to the same stringent requirements that we as lenders, loan officers and industry participants are held to by the new regulations imposed upon the industry by Congress.
The media blitz this past week reported that mortgage rates were down to 4.5 percent, which may be true to an extent, but not a true picture for borrowers. I’m talking about full disclosure of what the rates really are. Half truths create chaos for those who are unaware that these are not the actual rate you can finance or refinance a home with.
Fannie and Freddie set the lending rates based on market conditions. These are base rates prior to distribution to lenders and not the rates lenders can offer to their borrowers. What Fannie and Freddie are not saying in their press releases are that they are adding additional costs to those base rates.
Call it a mark-up due to the declining markets. Call it a margin to make up for loan losses or call it an add-on for whatever purpose they see fit. Bottom line is that rates at 4.5 percent are not readily available to the public unless borrowers are willing to pay points, which is a discussion for another day.
In today’s highly regulated market, redisclosure is now required each and every time something changes during the loan processing state. For everyone in the industry, advertising must meet certain regulatory guidelines when talking about loan rates and loan programs. Full disclosure is for everyone and it should be especially the same for Fannie and Freddie with any media report that discusses interest rates. To do anything less is misleading to the public and in this past week of low-rate mania, it has done just that.
In order to get those low, low rates you hear and read about, be prepared to pay for it. The rates you hear about from Fannie Mae and Freddie Mac are base rates before any additional fees are added. It’s like buying the lobster off the boat from the lobster man, before the distributor and ultimate retailer has had a chance to add on a profit.
Joe Adamaitis, a mortgage banker with Academy Mortgage Corp. in Sarasota, can be reached at (941) 706-5695 or joe.adamaitis@academy.cc.
