Hello Friends, Mortgage interest rates continue to be near the all time low levels we have continued to experience since June of this year. Rates bottomed in the first week of August with the run ending on 8/12/2020. This was a reprieve from the torrid pace set by the Federal Reserves’ continued commitment to suppressing interest rates to stimulate consumer spending during the worst economic crisis since the Great Depression.
The rise in mortgage rates was focused on refinances and was directly caused by the FHFA, Federal Housing Finance Agency, led by Mark Calabria. Calabria and the FHFA control the large institutional mortgage investors, Fannie Mae and Freddie Mac, where the bulk of mortgages are originated and sold. On 8/12/2020, towards the end of the day, it was announced that Fannie Mae and Freddie Mac were instituting a new “Adverse Market Refinance Fee.” That fee is basically a 50 basis points fee (0.5%) hike to mortgage refinances sold to Fannie/ Freddie starting Sept. 1, 2020. Lenders immediately increased the one-time points fee by .5 point on all refinance loans on the evening of 8/12/2020 and into the next day. One industry group says the new fee increases the average cost of a refinanced mortgage by $1,400. I am seeing this refinance tax increasing the one-time cost to my borrowers by between $500 – $3,750 on a conventional refinance that conforms to Fannie/Freddie guidelines and loan limits. Those transactions make up 90% of my current loan volume.
The FHFA tax translates into a raise in mortgage rates for refinances of between .125% and .375%, depending on the loan product selected and the combination of borrower and subject property statistics. This means that for the same one-time cost prior to the tithing being implemented by Mark Calabria and the FHFA, the rate is higher by roughly .25% across the board. The reason for this sudden fee
“Why isn’t my home selling as fast as I think it should?”
• How To Protect Yourself From Identity Theft!
8 Sure-Fire Ways to KILL Your Credit Score!
...And More Stuff Every Homeowner Should Know to herein are not available to persons located outside the state of California.
something our government is good at facilitating in the current administration.
In the grand scheme of things, the markets will recover from this refinance fee increase if the Fed continues to work to suppress interest rates. Purchase transactions are not affected with home purchases on the rise due to the historic rates. Frankly, I am happy to get the slight reprieve. At the time I am writing this, I have had three days off in 25 weeks straight.
Calabria seems to be moving full steam ahead with priva tizing the GSEs and not letting the coronavirus slow him down. The capital requirements the GSEs need to hold seem to be north of $200 billion. Using the current refinance boom, with rates at historically low levels, is one of the means Calabria and the FHFA have latched onto to help them get to the capital requirements needed to privatize and get out of government control. This seems contrary to the Federal Reserve’s intentions of suppressing interest rates to keep stimulating the economy, while we get out of this economic depression created by our flawed response to the pandemic. Somehow, I am not surprised considering that Calabria was economic advisor to current Vice President Mike Pence. Profiting from the misery of our nation seems to be
Thank you again for your continued patronage, support, and patience during this historic time. Wishing you and your loved ones good health in these stressful times.