On April 28th, FHFA announced the launch of a new refinance option program specifically for low-income families.
Earlier this month, Fannie Mae introduced the new program under the name RefiNow which will be available on June 5th. Freddie Mac version of the program, Refi Possible, will be available on August 30th.
On March 11, 2021, Fannie Mae announced in Lender Letter LL-2021-08 that they are implementing a tighter restriction on Second Homes and Investment properties.
This restriction came about after a recent agreement between FHFA and the U.S. Department of Treasury jointly deciding not to restructure the government-sponsored enterprises (GSE’s), Fannie Mae and Freddie Mac, and allowing the entities to retain more of their earnings. However, FHFA is stating this still may not be an adequate amount of money to avoid failure if there is another housing crisis. Some see this as a great risk for the market, predicting the GSE’s will focus on raising profit margins rather than helping serve the underserved communities, first-time homebuyers, and properties such as second homes and investments.
As we enter the second week of February 2021, we wanted to share a few upcoming agency updates that you should be mindful of.
USDA announced in a recent bulletin on February 3rd that Single Family Housing (SFH) is increasing the appraisal fee to $700 and the conditional commitment fee to $775 under the direct programs. This is a $100 increase from the previously $600 and $675 fees respectively. These new fees are to take effect 30 days from the announcement date. Prior to 2020 the fees were rarely assessed and adjusted but moving forward, these fees will be assessed and adjusted annually.
On December 2nd, 2020, Freddie Mac announced that they will be implementing reduced loan-to-value (LTV) maximums to the Home Possible program. Their December bulletin stated that this change will be effective on April 1, 2021. The Home Possible amendment largely affects 2- to 4- units for conforming loan limits.
On November 24th, 2020 the Federal Housing Finance Agency (FHFA) announced the new adjusted 2021 loan limits. A majority of the U.S. counties will see an increase, while 18 counties will remain unchanged. Loan limits did not decrease anywhere in the U.S. or its territories.
In March of this year, FHFA published a news release granting flexibilities for appraisals on purchase and rate term refinance loans. This decision is designed to help borrowers and lenders during the COVID-19 pandemic. FHFA has extended the loan flexibilities numerous times since. It has now been extended once again until November 30, 2020, according to the latest news release from FHFA on October 19, 2020.
On September 14, 2020, USDA released a bulletin stating that the funding for USDA’s Single Family Housing Guaranteed Loan Program will be temporarily unavailable for approximately two weeks beginning on October 1, 2020. At the beginning of each fiscal year the funding is not available for a short period of time and the USDA anticipates this brief lapse to continue for Fiscal Year 2021.
During the temporory lapse, the Rural Housing Development will issue Conditional Commitments “subject to the availability of commitment authority” for purchase and refinance transactions. In order for purchase transactions to be eligible, lenders will be required to provide the Conditional Commitments Form RD 3555-15/18E.
Why are Fannie Mae and Freddie Mac looking to increase refinance rates by 0.5% when refinance loans have been surging for mortgage companies? Interest rates have been at record lows, and lenders have applied stricter qualifying requirements to lower risks due to the uncertainty of the market, yet the agencies are looking to increase the price of Limited cash-out refinance and Cash-out refinance loans up 50 basis points starting December 1.
Letters were distributed to lenders from Fannie Mae and Freddie Mac on August 12 stating the increase was due to the uncertainty of the market and economic risk due to COVID-19.
Recently the long-term viability of LIBOR was undermined due to cases of rate manipulation, low volumes for underlying interbank transactions and the reluctance of panel banks to submit quotes used to calculate LIBOR. As a result, the Alternative Reference Rates Committee has now recommended SOFR as a replacement index for USD LIBOR-indexed contracts.
Let’s take a step back and dissect what this means for the industry, what these products are and what the future looks like. To start let’s talk about what LIBOR products are. LIBOR (London Inter-bank Offered Rate) is an interest rate set in London by major banks. It is an average interest rate (varying from a single day to a 12-month period) estimate of what major banks would be willing to lend to other banks.
Amidst the COVID-19 crisis, the government entities decided to loosen some requirements on various policies. Below are links to website articles, bulletins and resources containing information regarding these policy changes:
FHFA Mortgage Help for Homeowners Impacted by the Coronavirus
FHFA Announces New Mortgage Forbearance Guidelines
