19 Jul Refinances Got Their Braces Off
The Bottom Line:
Refinance pricing got a lot prettier on Friday so you or your clients should use our Find Your Best Rate Tool to see if you can save some money on your monthly payment.
What’s going on:
With last year’s mortgage rate plummet at the beginning of the Covid shutdown, more people were refinancing their home than binge watching Tiger King. At the same time, a record number of people were going into mortgage forbearance because they couldn’t make their payment. The FHFA (they oversee Fannie Mae and Freddie Mac) said they were getting nervous that all these people entering forbearance would stop making their mortgage payments and default as soon as the forbearances were lifted. So, they implemented the “Adverse Market Fee” (a little ironic considering it was the least adverse mortgage market the US has ever seen) in October 2020 of .5% of any refinance amount to hedge against the losses they expected once people started defaulting on their mortgages. That means that a $300k loan had an additional fee of $1,500. Now, the reason for the fee that they gave could be true, BUT…
Rumor has it:
Fannie Mae and Freddie Mac are quasi-government entities in what is called a conservatorship –meaning they answer to the Federal Government. However, the leader of the FHFA at the time wanted to take them private which would provide greater returns to investors because they could run Fannie and Freddie as a for-profit businesses instead of using them as market stimulators and regulators like they had been in the past. Rumor has it that this fee was implemented to raise Fannie and Freddie’s bank accounts so they could survive on their own.
However, a couple of weeks ago, the leader of the FHFA was fired by President Biden and replaced.
Refinances got their braces off:
The “Adverse Market Fee” was lifted on Friday and mortgage rates are a lot prettier. We see this a great thing because regardless of the reason the fee was implemented, responsible homeowners should not be stuck with the bill.
Hit the Find Your Best Rate box below and see if we can save you some money.