If you’re planning to get a high-balancing mortgage or a second home mortgage through Fannie Mae or Freddie Mac, you need to act fast — perhaps no later than January 31.
This is because the Federal Housing Finance Agency (the regulator and governor of Fannie and Freddie) announced plans to add Goliath fees to loans issued with the support of these two mortgage giants.
In high-cost Los Angeles and Orange counties, a high-equity mortgage is a loan that ranges from $647,201 to $970,800. Fees apply to owner-occupied homes, non-owner-occupied homes, purchase loans, refinance loans, and cash refinancing.
Technically, the new fees take effect on April 1, but lenders are likely to pass those fees on to consumers about 60 days before the official start date for withdrawing funds. We’re probably talking on the 1st of February. Especially with today’s omicron-affected job market in short supply, it takes time to assess, process, write and finance your loan before handing over to F or F.
The sooner you lock in your rates, the better – like yesterday. no kidding.
Depending on the loan-to-value (down payment or remaining balance if refinancing), this new mandate means that one to three quarters of an additional point will be charged for a high-balance loan. For example, a quarter of a point on an $850,000 loan equals $2,125; Three-quarters of a point equals an additional expense of $6,375 for you and yours.
Assuming the fee adds half a point to your cost, that would translate to a 0.125% higher mortgage rate. The rate would be 0.25% higher if you received a fee increase of three quarters of a point.
For example, on a 30-year fixed loan of $850,000 at 3.25%, the payment would be $3,699. At 3.5%, the payment would be $3,817, or an additional $118 per month.
It’s worse for a second mortgage. We’re talking about a range from adding 1.125% to 4.125% in additional points – the lower amount if you have at least 40% up front or in equity, and the higher amount with a minimal down payment – say 10%.
On a $500,000 loan, adding 1,125 points would cost an additional $5,625.
Federal regulations prohibit lenders from charging borrowers more than 3% in points and establishment fees. But lenders are likely to charge a higher interest rate on the loan if their costs go up.
For example, if you’re taking a 10% discount on a second home and trying to absorb an additional 4.125% in fees, your price could go up by 0.75%. On a $500,000 30-year fixed rate mortgage at 3% rate, the payment would be $2,108. At a rate of 3.75%, your principal and interest would be $2,316, or an additional $208 per month.
And it’s just six months after Thompson, the acting director at the FHFA, said in a press release about killing half the point of the “adverse market refinancing fee” set by her predecessor, Director Mark Calabria, in December 2020. It was all about helping families lower housing costs. And let families save more money. This idea quickly faded with this new ad.
This press release had the great audacity to say, “The expectation of the FHFA is that those lenders who have been charging borrowers will return cost savings to borrowers.”
To my knowledge, Van and Fred have never paid negative market fees to their lenders. And the lenders never refunded the $5.9 billion to borrowers that had been raised as a cushion for the adverse mortgage market that never materialized.
A wide range of primarily purchase-driven affordable housing programs are excluded from these new fees.
“These targeted price changes will allow Fannie and Freddie to better achieve their mission of facilitating equitable and sustainable access to home ownership, while improving the regulatory capital position over time,” said Thompson’s announcement.
Call me sarcastic. If the FHFA sticks to people it thinks can more easily afford this hidden tax (borrowers with larger mortgages and second home financing), why not use some or all of these fees to subsidize costs for low-to-medium income borrowers?
If you can’t complete your transaction before the fee increase takes effect, you can still likely find the best high-balance deal through a traditional Fannie or Freddie lender.
Second homes are a different story, and you may find cheaper prices for a second home elsewhere. I found a rate as low as 3.25% with no points, despite it being down 20%.
Freddy Mac rate news: The 30-year constant rate averaged 3.22%, the highest since May 2020 and up 11 basis points from last week. The average 15-year fixed rate was 2.43%, up 10 basis points from last week.
The Mortgage Bankers Association reported a 2.7% decrease in the volume of mortgage applications from the past two weeks.
minimum: Assuming a borrower obtains a 30-year average flat rate matching loan of $647,200, last year’s payment of $198 was less than this week’s payment of $2,806.
What I see: Domestically, well-qualified borrowers can get the following fixed-rate point-free mortgages: a 30-year mortgage at 2.5%, a conventional 15-year at 2.5%, a conventional 30-year at 3.25%, the highest conventional 15-year level – The balance (from $647,201 to $970.8800) is at 2.75%, the traditional 30-year high is at 3.375% and the jumbo steady 30-year is at 3.25%.
week loan: 15 years fixed at 2.625% no cost.
Jeff Lazerson, a mortgage broker. He can be contacted at 949-334-2424 or firstname.lastname@example.org. His website is www.mortgagegrader.com.