This heat wave had me craving one of those $.99 Arizona Iced Teas at the convenience store the other day, but when I went to buy it, the store charged me $1.29! The cashier had no answers as to the markup, and paying a little more than I expected certainly cut into the joy of the experience, despite my ultimate satisfaction in quenching my thirst. It’s never fun to pay more than you expect, which has some borrowers looking to refinance frustrated wondering why refinance mortgage rates have shot up recently.
The Federal Housing Finance Agency (FHFA), which regulates not only Fannie and Freddie (the GSEs) but also the eleven Federal Home Loan Banks, issued a directive this past week that the GSEs would charge lenders an additional fifty-basis points (0.50%, or $500 per $100,000) for all refinance transactions effective for all loans funded on or after September 1, 2020. Unfortunately, that cost falls onto consumers. For homeowners looking to refinance, that means an additional expense either in points to keep the rate down, or a higher rate and additional payment than they otherwise may have been expecting. The fee is being imposed as an “adverse market fee” to recoup losses in revenue by the GSEs due to early mortgage payoffs due to the refinancing boom and missed payments due to forbearances issued under regulations from the CARES Act. It’s a bit of a snowball effect.
If you have locked your rate, great! If you haven’t yet locked in a rate, and are looking to refinance, not only are rates still very low by historical standards, but there is some talk the FHFA will reverse the additional costs for refinances before it takes effect on September 1st. Looking forward over the next few weeks, you may consider floating your rate to see if the fee is lifted and a possible drop in rates and/or costs occurs. The risk is that the fee is not lifted, rates are higher and there is a possible missed opportunity to save a bit more on your refinance.
Give us a call at your convenience and we can not only keep you up to date on the latest rates and developments, but can walk you through exactly what it means for your financial picture. At American Eagle Mortgage, home starts here!