Last month I covered an announcement by the Federal Housing Finance Authority that was going to make refinance loans significantly more expensive. Essentially overnight, closing costs increased by ½% of the refinanced loan amount for applications not yet locked due to this “Adverse Market Fee.”
This would have been similar to deciding to buy expensive item at a store with an advertised price on the shelf, and then having the price change while you’re in the check-out line!
If that happened to you, you’d be upset & probably ask to speak with the store manager! Many mortgage and finance stakeholders did just that, and lobbied to the director of the FHFA to reconsider the surprise fee. While the fee was not reversed, the FHFA recently announced a delay to the implementation of the Adverse Market Fee until later this year. As such, there presently is a narrow window to close a refinance application before closing costs skyrocket.
But this window is closing quickly. Lenders are already starting to announce when they’ll be implementing this Adverse Market Fee. Some of my lenders have set dates between now and October 5th as the deadline for a loan to be locked to avoid this fee.
Lots of refinance applications are going to rush through the system in the coming weeks, so its important to get your application in early and follow my “Ready. Aim. LOCK!” plan I detailed in my last blog post.
When you combine the incoming fee increase with the current crazy low interest rates, it makes a compelling case to take action now. Rarely in our industry do we have a certain forecast as we do now guaranteeing closing costs will be higher in the near future. Rates are literally on sale, but the sale is ending soon!
My wife & I are following my own advice and recently began a refinance application for our mortgage. I would strongly encourage you to do the same if you have a fixed rate over 3.5%.