The Federal Housing Finance Agency (FHFA) in their all-mighty wisdom decided to add a .5% fee to Freddie and Fannie refinances submitted to them after September 1. So basically conforming loan refinances just got more expensive for the borrower. Note this is not applicable to purchase loans (so far), or FHA, VA, and other non-conforming loan programs.
What’s interesting is the Federal Reserve has dropped it’s Fed Rate to 0% and buying Mortgage Backed Securities at the level of $40B a month to keep rates down to support the economy and lower mortgage rates during the Pandemic. Meanwhile, Calabria and the FHFA are working against that system. The FHFA is attempting to profit from the lower interest rates, that the Fed (and the Tax Payer) is creating. I can see a fight coming!
Calabria had already conveyed in the past he wants to push the mortgages to the private sector and away from Gov’t guaranteed loans. He thinks the GSEs are crowding out the private capital sector. Increasing the GSE loans will make them more costly, and make the private sector loans more competitive. The bottom line, the private sector will not offer the same loan to value and income flexibility, thus tightening the money supplied to the housing sector.
There are already G-Fees (Guarantee Fees) added to the initial origination, and the ongoing repayment of the GSE loans. Those are supposed to be funds put aside as an “insurance” type fund, so if borrowers go into default, there’s money to cover it. That would eliminate the taxpayer from having to cover foreclosure costs.
The interesting thing is Congress found that they can grab those funds and use it for general expenditures, without the borrower or the general population seeing it. Essentially a hidden tax to the borrower as it’s not disclosed, and adding to the cost of the mortgage. This also has stripped money from the insurance fund. This has been a Cash Cow for Congress to use for non-housing related projects. Only recently Congress has allowed the GSEs to retain some of those funds, to enhance their reserves, and to prepare them for potentially taking the GSEs out of conservatorship. Note, when I was working as a Government Affairs representative for the California Association of Mortgage Professionals, and National Association of Mortgage Professionals, we fought the misappropriation of the G-Fees, and we’ll be doing the same with the new .5% tax. At least disclose “the tax” to the borrower, as we have to with all the other loan fees!
Above and beyond the new tax, the interest rates have been popping up since the end of last week. The attached chart of the US 10 Year Note shows graphically how the spiking of rates.
Some lenders have also been resently increasing rates on their end, to slow down volume, as the quantity of loan originations has stretched their system capbilities.
If you are in the Los Angeles area, have any questions or real estate sales or financing needs, feel free in contacting me
Ron Henderson GRI, RECS, CIAS
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
Chairman – OutWest Marketing Meeting (Real Estate Education)
BRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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