New FHFA Guidance Allows Borrowers In Forbearance To Access Record-Low Rates

Starting October 1st, 2020, mortgage refinancing is set to get more expensive thanks to the Federal Housing Finance Agency’s (FHFA) 0.5% refinancing fees.

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FHFA initially announced this fee to be implemented in August but delayed the implementation to December 1st after hue and cry from the industry associations and some politicians.

FHFA governs Fannie Mae and Freddie Mac which together buys almost 90% of conforming loans currently being originated. Which means the fees will make pretty much all conforming loans more expensive.

But wait!

If the fee is supposed to be implemented on December 1st, how come the refinancing mortgage rates are going up now? To understand this, you need to know how the mortgage process works.

The lenders are taking 45-60 days to close refinances right now given how busy everyone is mostly because of the overwhelming amount of business but also because of delays related to the pandemic. After the loan closes, lenders typically take 2 weeks to package the loan to sell to Fannie Mae or Freddie Mac. And for any loans sold to these agencies on or after December 1st, they will need to pay that 0.5% fees.

This also means that the loans currently being locked will need to be locked with that fee already built-in, otherwise, the lenders will end up paying the fees from their pocket. Most lenders already implemented these fees into their rates last week, and some are doing it on October 1st. My guess is, by that date ~100% of the lenders would have implemented those fees, making refinancing more expensive by 0.5% of the loan amount.

If your loan amount is $500,000, this would mean either a higher rate or an additional cost of $2,500, or a combination of both.

So, even if you are reading about low mortgage rates in media, understand that moving forward, that would apply mainly to mortgages for buying homes and not for refinancing. The FHFA fee doesn’t impact purchase loans or loan amounts under $125,000.

So, if you haven’t refinanced yet, your window to get the most attractive rates would be closing in just a couple of days. At Arcus Lending, we can still help you get some of the most competitive rates before they are gone.

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