money How Regulators Might Kill 2020 Mortgage Refinance Boom
This post originally appeared on The Basis Point: How Regulators Might Kill 2020 Mortgage Refinance Boom
A top U.S. regulator might have just killed the 2020 mortgage refinance boom, removing low rate stimulus when Americans need it most. Here’s a rundown, and I’ll update this post as this situation plays out.
Fannie Mae and Freddie Mac back America’s mortgage market by buying loans from lenders. This enables lenders to make more mortgage refinance loans for cheaper as long as lenders follow Fannie and Freddie rules for making loans.
Those rules ultimately come from Fannie and Freddie’s regulator, the Federal Housing Finance Agency (FHFA), who this week made a rule lenders must pay 0.5% on every refinance loan they make to consumers.
Lenders pass these costs onto consumers, so this 0.5% fee effective September 1 will be added to fees quoted by lenders to consumers. On a $300,000 loan, this is an extra $1500 in closing costs.
Or in lieu of cash, it could be factored into the rate, making the mortgage rate about .25% higher. If that same $300,000 loan had a 0.25% higher rate, that’s an extra $750 per year in interest cost.
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