Chris Salese: Napa’s Loan Ranger: What does the new refi nance tax mean for you?

Dreamstime

What does the new refinance tax mean for you?

Since we are officially through the first quarter of 2021, an entire three months past the most remarkably eventful and damaging year on record, nothing surprises me when it comes to the twists and turns of the mortgage industry. Last year I wrote about a refinance tax from Fannie and Freddie that came out of the blue and at the strangest time, right smack in the thick of COVID, which shocked the entire

CHRIS SALESE lending world. Now the Federal Housing Finance Agency (FHFA) is at it again. This time, through an agreement with the U.S. Department of Treasury.

However, at least this latest move was publicized via a press release by the U.S. Department of Treasury on January 14, 2021 and not a complete surprise. I mean, who didn’t read this press release right?

First off, not too many people read press releases from the Treasury Department.

Secondly, even if they did, there’s a strong chance that they don’t understa nd it all. I did not.

For example, the press released stated that the Treasury and the FHFA agreed to “amend the Preferred Stock Purchase Agreements (PSPAs) between Treasury and each of Fannie Mae and Freddie Mac (the GSEs) to move the GSEs toward capitalization levels consistent with their size, risk, and importance to the U.S. economy.”

It went on to say, “and to codify several existing FHFA conservatorship practices, including providing small lender protections and limiting future increases in certain higher-risk lending practices.” The agreement also “outlines a plan for Treasury, in consultation with FHFA, to develop a proposal for co ntinued GSE reform.”

Yes, lots of stuff in there and it was announced at such a time when there was really nothing else going on in the world. Insert more sarcasm.

Basically, although there was technically a press release, nobody paid attention. Alright, fast forward to April 1.

Funny, because that’s some date we call April Fools’ Day. Anyhow, starting on April 1, Fannie and Freddie started limiting the acquisition of single-family mortgage loans secured by second homes and investment properties to 7% of their volume.

What does this mean to you?

Well, industry professionals are trying to figure out exactly the short-term and long-term impacts.

There’s some government rulemaking that’s attempting to delay the mandatory compliance of this rule. At the moment, the quick answer is that in order for lenders to comply with this new agreement, any second home and investment property loans just got more expensive cost and rate wise for you.

These are the types of loans used when purchasing vacation homes or tenant-occupied real estate.

The good news is that some lenders haven’t made the pricing adjustments yet and rates haven’t changed dramatically. Unfortunately, this could only be a matter of time.

For now, keep your hands ready to catch your eyes when they pop out of your head after you get hit with the new rates from those lenders who have made the adjustments for early compliance. It’s not April Fools’ Day.

Chris Salese can be reached at chris@ delsurmortgage.com or 707-363-4439. He is a licensed California mortgage lender (LO NMLS #254469 — CA-DBO #254469 Corp NMLS #1850 Equal Housing Opportunity.

CANI AFFORD A NEW HOME?