In an effort to protect themselves from the uncertainty of pulling back payment deferrals and the other rippling effects COVID has had on the lending industry, Fannie Mae and Freddie Mac have raised their fees. The two mortgage giants will begin to charge .5% of the loan amount up-front on all refinances to hedge against expected rising default rates. This surprise announcement will go into place for all loans Fannie and Freddie purchase in September, meaning brokers will see the increase in fees almost immediately. The average fee will be $1,400 based on US refinance amounts. The fee has been criticized by the CEO of the Mortgage Bankers who says it is a “slap in the face” to one of the only thriving industries during the pandemic. Others claim this move shows blatant disregard for the Federal Reserve’s efforts to keep rates low to support the economy by purchasing over $40B of mortgage backed securities per month.
Mortgage backed securities are sitting on their 25 day moving average. If we see a drop lower, bonds have room to fall to yesterday’s lows. If we see them move higher, they have a lot of room to rise before hitting their ceiling of resistance. The safe move is to lock.