New Restrictions on Refis Accused of Tightening Mortgage Loans

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Mortgage lenders tightened their underwriting standards in June, reversing much of the easing seen over the past six months as initial fears over the long-term impact of the pandemic began to subside.

Mortgage lenders tightened their underwriting standards in June, reversing much of the easing seen over the past six months as initial fears over the long-term impact of the pandemic began to subside.

That’s according to the Mortgage Bankers Association (MBA) Mortgage Reliability Index, which showed that loan availability fell to its lowest level since September 2020.

The Mortgage Bank Associations Mortgage Affordability Index (MCAI) fell 8.5 percent to 118.8 in June. A source: Mortgage Bankers Association

The tightening was largely due to restrictions on the refinancing of high lending-to-value mortgages imposed by Fannie Mae as well as Freddie Mac in consultation with its federal regulatory body, the Federal Housing Finance Agency (FHFA), in order to comply with the requirements of the Consumer Financial Protection Bureau revised qualified mortgage rule– said Joel Kahn of the MBA.

The availability of loans for all types of mortgages fell 8.5% in June, while the availability for regular, qualifying mortgages, which Fannie and Freddie can buy, fell 23.5%.

Joel Kahn

“We really saw adding refinancing programs are designed to lower costs for lower-income borrowers, but the full impact of these new lending programs remains to be seen, ”Kahn said in a statement. statement… “Apart from the supply cuts due to the policy change, there has been a rollback of ARM’s giant offerings, resulting in the lowest giant loan supply since February 2021.”

In the months ahead, homeowners may have a greater incentive to refinance their mortgages. FHFA announced on July 16 that Fannie and Freddie no longer have to charge creditors refinancing fee of 50 basis points.

The fee, equal to $ 500 for every $ 100,000 refinanced, was intended to help the mortgage giants cover at least $ 6 billion of expected losses due to the pandemic. The FHFA determined that the fee is no longer needed as most of the borrowers who stopped paying off their loans during the pandemic no longer tolerate.

On the other hand, new restrictions imposed by federal regulators on the purchase of Fannie and Freddie loans secured by a second home and investment property are considered to be a contributing factor. recent decline in demand for those houses.

Email Matt Carter





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