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
Covid-19 mortgage tips to save your deal is a fabulous blog written by our team’s Sacramento lender, Dan Tharp. Enjoy. — JaCi Wallace
It’s been almost two months since Governor Newsom’s order that all Californian’s shelter-in-place. It sure feels like more. I feel such empathy for those that live alone, are single parents or have lost their job, It’s simply awful. I am thankful every single day I get up and get ready for work.
Covid-19 has re-ordered virtually every industry in the world to figure out how to adapt,. Not only adapt, but mprovise, and overcome this virus or otherwise fail. In California, mortgage lending and real estate are still thriving; all be it, with a whole new subset of issues to we have never faced before. Below are just a few tricks that might help you during your next purchase:
Did you know that in some cases, your lender will not require you to get an appraisal when buying a home? We have been doing this for years. Now, with Covid-19, and given the fact, sellers don’t want a stranger in their home, the appraisers can be just as uncomfortable entering a home. It’s lovely to know you have this option if you work with the right lender.
Fannie Mae and Freddie Mac traditionally offer an appraisal waiver for low loan-to-value refinance or if you put down at least 20% on a purchase. Also, in conjunction with new Fannie and Freddie Covid-19 updates, our underwriters are permitting exterior only appraisals under certain circumstances.
However, you may still want to get an appraisal done (~$525) to ensure you are not paying too much for the home. But if you and your agent have taken the time to look at comparables and feel the value is there, not needing an appraisal can not only save you money by not having to pay for the report, it can also help in other ways.
For example, I had a client facing multiple offers, and the only reason their offer was accepted is that they came in at asking price AND agreed to remove the appraisal contingency. Meaning, if for some reason, the appraisal came in lower, they would have to come out of pocket to make up the difference. These buyers didn’t have much in reserves after the down payment and closing costs, and what they did have left was their cushion for any future emergencies. With this appraisal waiver in place, they would not pay one extra dollar out of pocket – And not needing an appraisal was just what they needed – peace of mind.
CAN’T GET A JUMBO LOAN?
Jumbo loans have been walloped during this pandemic as mortgage servicers tighten their lending criteria. Many lenders have stopped issuing them altogether. Jumbos are loans that exceed the maximum you can borrow with a Fannie, Freddie, or FHA conforming loan. For example, let’s assume you are buying a home in Sacramento County, where the max Fannie/Freddie loan amount is $569,250. Thus, if your loan amount is higher – you fall in the Jumbo loan category.
Since Fannie and Freddie do not back jumbo loans, they are considered riskier and require higher credit scores, lower debt-to-income ratios, and may require a few months of cash reserves or even up to a year or more worth of mortgage payments. A little trick is to use a piggyback second mortgage to avoid taking out a Jumbo loan. Jumbo rates can be higher than those on conforming loans, so borrowers buying a high-value home may take out a conforming mortgage, then cover the rest with a piggyback loan and down payment.
Qualified For A Loan
Let’s assume you found your dream home for $850,000 in the perfect neighborhood. Now, throw in you were just told by your Jumbo lender that the loan for $680,000 you were qualified for, no longer exists. When the reserves required become higher, your rate just went up too. You could instead go with a conforming loan of $569,250 plus a piggyback loan of $110,750 and save the day.
Every day this pandemic throws new challenges our way. Because of that, we continue to adapt and improvise and overcome. This is why it is essential to work with people you trust. Lenders that have decades of experience will guide you through the steps of homeownership and finance. Be safe, everyone.
— Dan Tharp with Guild Mortgage