Hope you already finished your refi!!

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Submitted by treehugger on August 17, 2020 - 2:06pm

https://www.marketwatch.com/story/refina...

Glad I finished mine a few weeks ago! I have been telling everyone now is an amazing time to refi (I got 2.6%-30 year fixed with no points, costs, or fees).

Gotta love the government!

Submitted by spdrun on August 17, 2020 - 3:13pm.

That's basically sligtly more than a monthly payment. $500 per $100k of mortgage. If they can't afford it, they shouldn't be buying. It's literally $3000 on a $600,000 house. One time payment. Would any of you pass up a good deal because it cost $603k instead of $600k?

Submitted by gzz on August 17, 2020 - 3:53pm.

This is a COMPLETE OUTRAGE!!!

Doesn't the Treasury still own nearly all of Fannie's stock? Time to get a new board of directors.

The worst part is that it's impossible to rush in an application, no way it can actually close before 9-1-20.

Submitted by gzz on August 17, 2020 - 4:05pm.

"Very low class move" is exactly right.

From Mortgage News Daily:

So what's the real reason?

Lender margins are wide. In other words, lenders haven't dropped rates as much as the bond market would allow them to (a decision driven by necessity due to capacity constraints amid a refi boom and unprecedented workflow hurdles created by coronavirus rather than simple greed). FHFA sees the wider margins and concludes lenders have extra profit to spare. That money would help further the FHFA's stated goal of building capital reserves of the GSEs sufficient to end the government's conservatorship of the agencies. In simpler terms, FHFA is saying to lenders "I think some of your money should be our money instead." Rest assured, this fee would never have been considered if rates were higher and lender margins were thinner. But since rates are so low, and margins are so wide, who's going to complain? Plenty for everyone, right?

So who is going to complain?

Ultimately, homeowners. The mortgage community is going to get things started though. Reason being, lenders have tons of loans that are already locked with expiration dates after September 1st. They are going to have to eat 50bps on all those loans. For big lenders, this is 10s of millions of dollars in instantly vaporized profit.

Again, FHFA's rationale is likely that lenders have excess profit anyway, so they can absorb this.

I truly hope that's not their rationale, but if it is, they're dumb. Any time regulators jack up fees for lenders, it's the consumer that ends up paying. I'm not saying that because it sounds sensational, but because there is a consistent track record of correlation. In fact, lenders are ALREADY sending out reprice notifications to raise rates for those loans still eligible to lock today. In other words, if it's not already locked, your refi just got hit for 0.5 points.

Does this affect purchases?

No. You're in luck there. FHFA's explanation, however, is further out of luck. Think about it... Why would "market and economic uncertainty" affect refinance mortgages and not purchases? I'll tell you why... Many lenders currently have higher rates for refis vs purchases due to the insanely high refi demand. Those higher rates mean the lenders have higher margins and more profit on refis (more profit that the FHFA would like to take, but again... they're actually taking it from consumers).

Does this suck as bad as it seems like it does?

Yes. It's a bitter pill to swallow, and a very low class move given the issues facing society at the moment. Granted, the FHFA likely doesn't see it that way. They likely don't think or believe they're taking money out of consumer's pockets, but years and year of past precedent prove that's exactly what's about to happen.

Is there anything I can do to avoid this or make it better?

No. They're the government. They're here to help.

Submitted by barnaby33 on August 25, 2020 - 5:40pm.

Personally I think rates need to rise substantially, but then again we'd have to stop deficit spending in line with that. Party on Waynes and Garths of the world!
Josh

Submitted by gzz on August 25, 2020 - 5:52pm.

If the US Gov cut the deficit to 0, we'd go into an even deeper recession and the supply of quality investments would go way down.

The result would be mortgage rates even lower for good buyers.

Submitted by sdrealtor on August 25, 2020 - 6:12pm.

It looks like the 1/2 point additional fee has been postponed until December

Submitted by barnaby33 on September 7, 2020 - 6:42pm.

The problem is there are no good deals specifically because the rates are so low and there does seem to be some demand.

You don't make money when you buy, you make money when you re-finance down the curve and that's not really possible from here on out.

Josh

Submitted by Coronita on September 7, 2020 - 7:56pm.

huh?

Submitted by sdrealtor on September 8, 2020 - 7:30am.

barnaby33 wrote:
The problem is there are no good deals specifically because the rates are so low and there does seem to be some demand.

You don't make money when you buy, you make money when you re-finance down the curve and that's not really possible from here on out.

Josh

Wrong! You make money when you buy based upon what and where you buy. You get that money when you sell or refi.

Submitted by svelte on September 8, 2020 - 8:03am.

I think what Josh was trying to say (though I could be wrong) is a theory I've had for some time:

People can afford a max payment of X.

If you buy when interest rates are high, that depresses home prices because they still have to fit under max payment X.

If you buy when interest rates are low, that tends to increase sales prices because there is more room under max payment X.

Therefore, you're better off to buy when rates are high (lower purchase price) then refi once interest rates drop.

You can always change your interest rate, but once you buy the purchase price can never be changed.

Submitted by Andrew32 on September 8, 2020 - 9:12am.

Re: buy during high interest rates

That’s obviously true from a theory standpoint but who would wait around for 2012-2015 to come around again when prices (and rates were relatively low) for either an investment or Owner/occupy property. It likely won’t for a long time.

I think it’s pretty rare, and great that people that bought in that timeframe currently benefit from the doubling home prices in 8 years (not common) and refinancing into super low rates. I know several people in the Del Sur and other communities that bought new, and will be upgrading to more coastal/land/sqaure footage only because of this fortunate timing.

Submitted by svelte on September 8, 2020 - 10:17am.

Andrew32 wrote:

That’s obviously true from a theory standpoint but who would wait around for 2012-2015 to come around again when prices (and rates were relatively low) for either an investment or Owner/occupy property. It likely won’t for a long time.

There probably aren't a lot of people who wait, but the bottom line is still the same: a buyer can only qualify for a payment so big. If interest rates are high that will mean the monthly amount that goes towards paying off the house will be smaller...meaning they will have to buy a lower priced house than if the interest rate were lower.

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