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Mortgage Rates Are Going Up -- But Not For The Reason You'd Expect

Conforming mortgages are getting more expensive -- but not because of mortgage rates. 

To protect against further weakness in the housing sector, Fannie Mae and Freddie Mac are instituting "delivery fees" on all conforming mortgages, effective March 2008.

Fannie Mae's Adverse Market Delivery Charge and Freddie Mac's Market Condition Delivery Fee will add a one-time, quarter-percent fee to every home loan purchased from mortgage originators.

This means that on a $100,000 conforming mortgage, the borrower could:

1. Pay a $250 fee out-of-pocket
2. Accept a slightly higher interest rate that "finances in" the higher fee

Because the fee is in percentage terms, as the loan size increases, so does the fee.  A $300,000 mortgage will carry a $750 fee, for example.

Unfortunately, mortgage borrowers may not get to choose on how they pay the extra cost.  Many mortgage lenders are just adding it to their rate sheets. 

Be aware, the 0.25% fee does not apply to all loans -- only to loans sold to Fannie Mae and Freddie Mac.  This specifically excludes portfolio loans and sub-prime loans.

If you're not sure for what type of loan you are applying, be sure to ask.