Low Mortgage Rates During Economic Crisis

Mortgage interest rates continue to be near the all-time low levels we have been experiencing since June of this year. In the first week of August, rates bottomed out, ending the run on 8/12/2020, marking a reprieve from the torrid pace set by the Federal Reserves’ continued commitment to suppressing interest rates, in order to stimulate consumer spending during what is arguably the worst economic crisis since the Great Depression.

Refinance Loan Points Increase

The current rise in mortgage rates has primarily affected refinances. This rise was directly caused by the Federal Housing Finance Agency (FHFA) — led by Mark Calabria. Calabria and the FHFA control the large institutional mortgage investors, Fannie Mae and Freddie Mac, with whom the bulk of mortgages are originated and sold.

On 8/12/2020, towards the end of the day, Fannie Mae and Freddie Mac announced that they were instituting a new “Adverse Market Refinance Fee.”

This fee is a 50-basis-points (0.5%) addition to mortgage refinances sold to Fannie and Freddie, starting Sept. 1, 2020. In response to this announcement, lenders immediately increased the one-time points by 0.5 on all refinance loans.

Estimates place the average cost of a refinanced mortgage to have increased by $1,400 from this fee hike.

I am seeing this refinance fee increasing the one-time cost to my borrowers by from between $500 – $3750 on a conventional refinance that conforms to Fannie and Freddie guidelines and loan limits.

Incidentally, these transactions make up 90% of my current loan volume.

Refinance Loan Rates Increase

The FHFA refinance fee also has sparked a reaction by the market, translating into an increase in mortgage rates for refinances of between .125% and .375% — depending on the loan product selected and the combination of borrower profile and property statistics. This means that in addition to the one-time cost being implemented by Mark Calabria and the FHFA, the current mortgage rate is now higher by an average of roughly .25% across the board.

The reason for the sudden addition of a fee to refinances is obvious: We are in the middle of the largest refinance run in our country’s history, with r