A new tax on mortgage refinance is a brilliant blog written by our fabulous lender, Dan Tharp, with Guild Mortgage. –Enjoy, JaCi Wallace. Dan has some good news and some bad news. Here’s the bad news first.
Last week, the Federal Housing Finance Agency (FHFA) announced a surprise fee on all new refinance transactions sold to Fannie Mae and Freddie Mac. This is making up approximately two-thirds of all loans. The cost was assessed regardless of the bank or mortgage company you choose to work with . End result, it will increase the interest rate that you had been expecting and had been available.
Hearing this news on a new tax on mortgage refinance was a bit of a shock. This sudden move came as a surprise; both in the imposition of the fee, and in making the fee effective almost immediately. Historically, they allowed 60-90 days before the new pricing went into effect. This time frame will enable lenders reasonable time to close their rate lock pipelines.
Why are they introducing a new fee?
Two reasons. First, both Fannie and Freddie are concerned about the uncertainty surrounding future mortgage defaults and the increased costs they incur. Secondly, they are worried about how quickly their current mortgages are prepaying due to the unprecedented wave of refinances. When a loan refinances, the prior loan comes out of the security, which creates losses to the investor who owns that mortgage. By raising the cost to refinance, it will slow down how past loans are paying off.
What is the impact to borrowers?
- Across the country, lenders are adding these new refinance fees into rate sheets effective immediately for all conventional conforming refinances.
- These fees are on top of all other fees already charged by Fannie and Freddie.
What Happens Next?
The mortgage industry is united in its disappointment with the announcements. More specifically this disappointment is with the break from all past precedent of providing a reasonable advance notice of the effective date. The probability of FHFA, Fannie Mae or Freddie Mac revising their announcements with a different effective date, is probably low.
Now for some good news…
Interest Rates are still at extraordinarily low levels. Refinancing may be a smart financial move, which can save you money every month or reduce the number of years remaining on your mortgage. You may also be able to consolidate your debts to save even more money.
Let’s take a look at your unique situation to see if you can benefit from this opportunity. Call me, Dan Tharp, your mortgage professional. with Guild Mortgage. I can be reached at 916-257-1470.
— Dan Tharp NMLS #280913