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 24^th, 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:

Links to FHFA:

FHFA Mortgage Help for Homeowners Impacted by the Coronavirus

FHFA Announces New Mortgage Forbearance Guidelines

With so much in the news regarding Fannie Mae and Freddie Mac potentially ending the conservatorship, I wondered how long Fannie Mae and Freddie Mac have been around. To stimulate my curiosity, I did some quick digging to see how Fannie Mae and Freddie Mac came to be.

To start let’s talk Fannie Mae, also known as the Federal National Mortgage Association (FNMA). Fannie Mae was founded in 1938 by the U.S. government. This was during the Great Depression and the creation of Fannie Mae was part of the New Deal program. With the funds Fannie Mae received from the government, the goal was to have Fannie Mae buy the mortgage loans from private companies and local banks who were struggling financially. With the private companies and banks having more capital and the ability to finance home loans again, the government hoped this would inspire more lending during the economic crisis. 

It’s that time of the year again. On November 26, 2019 the Federal Housing Finance Agency (FHFA) announced the new adjusted 2020 loan limits. With these adjustments, most of the U.S. counties will see an increase, while 43 counties will remain unchanged. Loan limits did not decrease anywhere in the U.S. or its territories.

For Contiguous States, District of Columbia, and Puerto Rico the maximum conforming loan limits for 2020 are as follows:

1-unit     $510,400

2-unit     $653,550

3-unit     $789,950

4-unit     $981,700