Refinancing your Fannie/Freddie mortgage will cost more now

[Andrew Postell]

Back during the housing crises there seemed like an almost daily update of companies going under, job loss, foreclosures, etc. And while we aren't there we had a pretty big announcement today after Fannie Mae and Freddie Mac announced a new 50bps loan pricing adjustment on all refinance loans purchased on or after September 1st – so basically, nearly every loan that is being refinanced by them.

The move, obviously meant to "help" our struggling, coronavirus-weakened economy, comes at the directive of the FHFA and is meant to curb the “higher risk and costs” associated with refinance mortgages (yeah, right). This coming after Freddie Mac and Fannie Mae enjoyed record earnings in Q2 of $1.8 billion and $2.5 billion, respectively. This is an obvious cash grab by the agencies. Some say, the move was meant to bolster the GSE’s capital levels as they prepare to blast back out in to the private sector; an interesting move, given how effective the Federal government has used the GSEs as an effective vehicle for taxing American homeowners. To be sure, most Americans have absolutely no clue how the GSE’s even work and politicians even less.

As for the market, my sense is that it will take several weeks for it to adjust to this new pricing hit on Refis. A 50bp pricing adjustment is roughly equivalent to an extra 1/8th in interest rate – an 1/8th that homeowners will unwittingly pay on loans going forward when they lower their monthly mortgage payment. What’s not apparent at the moment, is how will other components of pricing react – namely, servicing values, MBS pricing, and spreads between mortgage rates and treasury rates. We’ll certainly see some movement and at the end of the day, the net-impact on borrowers will be something lower than 50bps. Interest rates were under pressure for the 4th day in a row after Initial Jobless Claims came in just below 1 million for the first time in 21 weeks – a positive sign for our country. While the yield on the 10yr moved above support at 71bps, mortgages closed the day sharply unchanged… see – already reaping the benefits of the new pricing adjustment on Refis!

[Luis Vaca]

So it's an an increase of 0.5%, which is an extra 500$ for every 100k loaned out. They probably figured they could take advantage of real estate since it's doing so well! BS

[Daniel B.]

@Andrew Postell

It’s insane. They timed this announcement with a jump in 19 year treasuries. Rates went up 1/4-3/8 pt in less than 48 hours. Refinance loans are taking months to close, for them to announce that this week with a September 1st start date is crazy. It screws over lenders who have locked rates with clients but don’t have enough staff support to get everything wrapped up in a matter of week. Those lenders just passed on the costs to future borrowers.

A lot of pushback, White House is reviewing. Will see if it sticks or isn’t at least delayed. The White House needs a good economy in an election year...

[Daniel B.]

@Daniel B.

10 year bond...not 19

[Chris Mason]

We've picked up 350 bps since Feb.

We just lost 50 bps.

Who cares...

Economy is still in the toilet. No one is curing COVID-19 any time soon, and even if that vaccine came out tomorrow it will take a long time to administer it to hundreds of millions of people.

Overall rate trend CONTINUES slowly downward, in spite of this little blip. It's still 2020. Bad news drives interest rates down. Is there ANYONE here who thinks that 2020 is going to run out of bad news any time soon? 

I locked my entire floating in-progress loan batch on 8/4, and haven't locked a single interest rate since then. I'm day-trading this recession all the way to the bottom, even day-trading the first-time homebuyers. Taking apps, ordering appraisals, getting the files into underwriting... but not locking the rate until the getting is good (or, if a purchase mortgage, until as late in the escrow as possible, give or take).