Making sense of the story

• The guarantee fee has been charged by government sponsored entities like Fannie Mae and Freddie Mac for more than three decades.  The fee does not show up in borrowers’ mortgage documents or good-faith estimates, and it is little known outside the industry.  According to a Fannie Mae spokesman, the fee “gets incorporated into the underlying rate the borrower pays.”
• An interest rate is usually made of up three parts: The largest goes to the bank or the investors who buy the loan; the smaller portion is for the mortgage servicer that collects monthly payments; and then there’s the guarantee fee.  Fannie and Freddie charge guarantee fees as a form of insurance against default for the loans they acquire and resell to investors.
• The guarantee fee will rise 10 basis points on April 1; the increase was included in the two-month extension of the payroll tax reduction last December.  A basis point is equal to one one-hundredth of 1 percent, or 0.01 percent.
• One way to avoid the guarantee fee is to use a lender that does not sell off its loans – for instance, a community bank or a credit union.
• In addition to offsetting risks, the fees provide a primary source of revenue for Fannie Mae and Freddie Mac.  Both organizations started raising fee rates in 2008 during the housing crisis, as foreclosure costs rose.

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http://www.nytimes.com/2012/03/04/realestate/mortgages-a-hidden-fee-is-set-to-rise.html?_r=1&ref=realestate

First-time home buyers planning to purchase a house later this year may have a better chance of qualifying for a mortgage if they have had a history of paying their rent on time.

Making sense of the story

• Last year, credit-reporting agency Experian added a section to millions of credit reports showing on-time rent payments and raised the credit scores of many people.  The company said that this year it would add in negative marks, including mentions of bounced checks or of tenants’ leaving before a lease was up.
• Incorporating rental payments into credit scores could affect millions of people who have not established credit histories through credit cards, student loan repayments, and other credit sources.
• Almost half of consumers considered “high-risk” experienced an increase of 100 points or more after their positive rental history was added, according to Experian’s rent bureau.  Those with average or higher scores did not experience major movement.
• Although it is still too early to show the effects of the new credit report, which began in December, the changes are intended to allow lenders and consumers to have greater transparency, according to Corelogic.
• People who have lost their homes to foreclosure and are now leasing may be able to rebuild their credit histories by being responsible renters.
• However, consumer groups and advocates are skeptical, noting that reports are sometimes riddled with mistakes and some landlord-tenant disputes may be difficult to capture in a credit report.  Rent may not have been paid, for example, because the furnace was left unrepaired for months.

Read the full story
http://www.nytimes.com/2012/01/08/realestate/mortgages-a-good-rental-history-can-help-borrowers.html?_r=1&ref=realestate