New refinancing fee sends rates skyrocketing

Rates took a beating after some new regulation came out from the FHFA, which had lenders running scared (more on this in a bit). As it stands, the 30-year fixed rate mortgage has resoundingly left 2s territory, increasing by 27 basis points to hit 3.12% while the 15-year mortgage increased by 24 basis points to hit 2.62%.

current outlook:

Congress recently left for their summer recess and won’t be returning until September. While it is possible that they will reach a stimulus deal in the interim, it is very unlikely. As the unemployed and the evicted are dealing with these delays, housing continues to hold its own. This week, though lenders and homeowners face the repercussions of new regulation, housing still received a boost in the form of more new listings and record-high home builder confidence.

New refinancing fee sends rates skyrocketing

Rates Just Took On a Couple Pounds, Ahem, Points

With so many people wanting to take advantage of low rates, GSEs Fannie Mae and Freddie Mac are attempting to ride this refinance wave by tacking on additional fees. Because while forbearance allows homeowners some reprieve from payments, someone still has to pay the investors and mortgage bond holders. As a quick recap, in order to help lenders maintain liquidity, the FHFA stated back in April that mortgage servicers will only be on the hook for the first four months of missed payments. After that, the buck will pass to Fannie Mae and Freddie Mac.

As it’s been roughly four months since servicers first began making payments, GSEs are anticipating a massive drain on their finances and are reacting accordingly, which is why they’re charging lenders a G-Fee (a guarantee fee to cover administrative costs and other expenses) of 50 basis points. These fees, effective immediately, will apply to all ongoing refinances except ones about to close. That includes loans that have already been locked, which will cost lenders tens of millions of dollars. How does this affect homeowners? While this fee only applies to refinances, lenders will be passing on their expenses by hiking rates across the board, including for purchases.

Selling, Selling, Sold!

We’re starting to see positive year-over-year growth in many categories for the first time since the pandemic began. More new listings were added in July 2020 than were added last year. Additionally, after falling 13% last month, home sales are up 21.7% month-over-month and 4.9% year-over-year.

Unfortunately, this means homes are selling faster than they can be replaced in the market. To make matters worse, as competition heats up, homes are also selling more and more quickly. The number of homes that received offers within two weeks of listing hit a new record, increasing by 48.5% from June, and 35.7% from last year. With listings at an all-time low, down a jaw-dropping 21.8% from last year, median home prices saw a growth of 4.3% from last month and of 8.2% from last year.

Home Builders Swing for the Fences

As a result of the current supply deficit and America’s voracious appetite for real estate, home builder confidence is at its highest point in its 35 years of existence. The index moved up 6 points to settle at 78 in August. Any level above 50 indicates more builders feeling good about single-family home conditions. Individual metrics of the Housing Market Index also increased, including builders’ attitude toward sales conditions (84), sales expectations (78), and buyer traffic (65). The only possible damper on their plans is the rising price of lumber, which has more than doubled since mid-April.

Based on data from the Department of Housing and Urban Development, it hasn’t slowed them down yet. In July, housing permits increased by 18.8% from last month and housing starts grew by 22.6%.

“Single-family construction is benefiting from low interest rates and a noticeable suburban shift in housing demand to suburbs, exurbs and rural markets as renters and buyers seek out more affordable, lower density markets.”

ROBERT DIETZ, NAHB Chief Economist
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