Good News

July 19, 2021

Last week we were reminded how much the secondary markets influence the primary markets, i.e., the rates offered to you and in turn, your borrowers. The Federal Housing Finance Administration, which oversees the activities of Freddie Mac and Fannie Mae, announced that lenders delivering mortgages to the GSEs (Fannie and Freddie) will no longer be required to pay the 50 bp fee for refinance loans, effective August 1.


The fee, designed to offset the expected increased credit risk facing the GSEs, was first announced in August 2020, though implementation did not happen until December 2020. Brokers and your clients have suffered ever since. So Orion’s management sees the elimination of the fee as a good thing, and is a positive for our broker’s prospective refinance volumes.


But while the move is welcomed, we need to remind our brokers that quantitatively it’s removal might not be as wonderful as some expect. The 50-basis point fee equates to about 10 bp in mortgage rate for the borrower, .125 if you round up, so while its elimination is positive for prospective refinance volumes, few expect a material impact on lender’s volumes.


Overall, the FHFA’s announcement is not likely to have a material financial impact on brokers given most industry forecasts for refinance volumes to slow meaningfully into next year. Orion’s management believes what is more meaningful is how this move indicates a change in leadership at the FHFA, and its willingness to listen to the lenders and brokers and other industry sources.


The extra charge was designed to cover losses projected as a result of the pandemic. The success of Covid-19 policies, however, reduced the impact of the outbreak and were effective enough to warrant an early conclusion of the adverse market refinance fee. Orion is immediately passing on these cost savings back to borrowers, something that is important for our brokers to know.

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