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Regulators Move to Make Refinancing a Reality for More Homeowners

Some homeowners have delayed refinancing their homes because of an "Adverse Market Fee" imposed by Fannie Mae and Freddie Mac at the end of 2020.

That fee, which drove up the cost and/or rate of a refinance, has now been removed and has the potential to save homeowners thousands of dollars.

Have you been on the fence about a refinance? Now may be the right time to move forward to get a lower rate or take cash from your home's equity to consolidate debt or move on other projects.

If you refinanced more than six months ago, recent increases in home values, continuing low rates, and the removal of the adverse market fee may mean you can save even more on your payment and/or access additional cash from your home’s equity. 

For complete details, to discuss your scenario or to get the process started, please reach out at to us today by clicking here.

 

 


 

With stimulus and tax refunds hitting bank accounts, now's a great time to talk about a new home.

Here are ways the extra cash from your stimulus check or tax refund can help with a home purchase:

  • Enhance or establish a down payment fund.
  • Secure a lower interest rate (which can help you qualify for a higher priced home).
  • Pay down or eliminate consumer debt (which also can help you qualify for more).
  • Satisfy cash reserve requirements for your purchase.

With some loan programs offering low or even no down payments, you may be able to get into a home sooner than you thought!

Before you take any action toward a new home purchase, please reach out to the experts at Greenway Mortgage.

Sometimes paying off that debt helps, and sometimes it’s better to have the cash on hand. Let’s look at your particular scenario to see the options available to you.


 

The Federal Housing Agency (FHA) has just increased the amount of money that can be borrowed through its mortgage programs by nearly $25k in most areas. In high cost locations, the increase is even greater. New limits will take effect in 2021.

The increases will allow more borrowers to take advantage of FHA’s benefits:

  • Low down payment options
  • Lower total cash-to-close requirements with gift or seller contributions
  • More lenient and streamlined refinancing
  • Ability to combine purchase and rehab financing
  • In some high-cost areas, higher loan limits than conventional mortgages

Here are the specifics:

  • In most areas, the FHA loan limit will be $356,362, a 7.4% increase over 2020’s limit of $331,760.
  • In high cost areas, the limit moves to $822,375, a 7.4% increase over 2020’s $765,600.
  • In some lower-cost areas or those with higher costs of construction, limits will vary.

Contact your Greenway Mortgage loan officer today for more details about how the increase can impact you.

New 2021 Loan Limits Effective January 2021


 

On November 24, 2020 the Federal Housing Finance Agency (FHFA) announced an increase in the maximum conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac in 2021.

The maximum loan limit for one-unit properties will be $548,250 an increase from $510,400 in 2020. Release.

The decision was based on the recovery of housing prices under the Housing and Economic Recovery Act of 2008 (HERA). They require that the baseline conforming loan limit be adjusted each year for Fannie Mae and Freddie Mac to reflect the change in the average U.S. home price.  

FHFA third quarter 2020 House Price Index (HPI) reported that house prices increased 7.42%, on average, between the third quarters of 2019 and 2020. The baseline maximum conforming loan limit in 2021 will increase by the same percentage.

For areas in which 115 percent of the local median home value exceeds the baseline conforming loan limit, the maximum loan limit will be higher than the baseline loan limit. 

A list of the 2021 maximum conforming loan limits for all counties and county-equivalent areas in the country can be found here.

WHAT DOES THIS CHANGE MEAN FOR HOMEOWNERS AND HOMEBUYERS?

This means YOU may be able to:

  • Purchase a higher priced home with more financing options, possibly including lower rates.

  • Refinance an existing, higher-rate “jumbo” loan and possibly drop mortgage insurance.

  • Combine 1st and 2nd mortgage

Contact your Greenway Mortgage loan officer today for more details about how the increase can impact you.

2021 Conforming Loan Limits Effective January 2021

 


 

A change is underway in the world of adjustable-rate mortgages and mortgage-backed loans such as revolving home equity lines of credit, known as HELOCs. For decades, the rates on those loans and a variety of other financial products were determined by an index called the London Interbank Overnight Rate (LIBOR). This is now being phased out in favor of a new index called the Secured Overnight Financing Rate (SOFR). Sometime after 2021, LIBOR is expected to be discontinued. However, the transition has already begun.

If you have an adjustable rate mortgage, a home equity line of credit or a reverse mortgage, it may be a good time to check with your servicer about which index your mortgage loan is tied to. Why? It could affect your rate the next time you’re due for an adjustment. To understand how this change might affect you, let’s dive into the key differences between LIBOR and SOFR.

 
LIBOR? SOFR? What’s the deal?
LIBOR and SOFR both measure the cost of short-term borrowing, though they measure that cost differently.
 
The London Interbank Offered Rate (LIBOR):
  • A benchmark interest rate at which major global banks lend to one another in the international interbank market for short-term loans.
  • A forward-looking average rate, computed daily, at which a contributor bank can obtain unsecured financing in the London interbank market, in a process overseen by the ICE Benchmark Administration (IBA). Based partially on market-data “expert judgment”.
  • Based on 5 currencies: the U.S. Dollar, Euro, British Pound, Japanese Yen and Swiss Franc.
  • Incorporates a built-in credit-risk component because it represents the average cost of borrowing by a bank.
  • LIBOR has 7 varying rates on terms of one day to one year.
  • LIBOR is a critical component of the financial system, hardwired into not only global derivatives but also business loans, securitizations, floating rate notes, adjustable mortgages, and student loans.
Secured Overnight Financing Rate (SOFR):
  • Unlike LIBOR, SOFR is a secured overnight (backward looking), risk-free rate based on actual transactions collateralized by Treasurys.
  • It is an influential interest rate that banks use to price U.S. dollar-denominated derivations and loans.  
  • Purely a daily rate.
  • Seen as preferable to LIBOR since it is based on data from observable transactions rather than on estimated borrowing rates. Also, because these transactions can be observed by anyone, it’s also less easily manipulated.
 
Why the change? LIBOR came under scrutiny in the aftermath of the Great Recession because bankers were manipulating the rate. In turn, SOFR was developed to be a more accurate metric that would be harder for a small pool of banks to manipulate.
 
Out with the old, in with the new!
Sometime after 2021, LIBOR is expected to be discontinued. However, the transition has already begun and is being overseen by the Alternative Reference Rates Committee (ARRC) of the Federal Reserve Board and New York Fed. According to the ARRC, by the end of 2020, mortgage holders with interest rates pegged to LIBOR should hear form their servicer about the SOFR transition for their specific mortgage loan.
 
The change will affect loans that use LIBOR as the index such as:
  • Some adjustable (or variable) rate loans and lines of credit like adjustable-rate mortgages (ARMs)
  • Reverse mortgages
  • Home equity lines of credit
  • Credit cards
  • Auto loans
  • Student loans
  • And any other personal loans
What does the switch to SOFR mean to Mortgage Holders?
Most mortgage-holders and applicants may not be affected by this change. Why? Adjustable Rate mortgages aren’t as popular as they once were and have lost even more appeal during the COVID-19 pandemic with general interest rates at all-time lows. Mortgage holders who have fixed-rate mortgages will not be affected as they are not tied to LIBOR or SOFR.
 
However, the changeover does mean that some loans could see slight adjustments when their underlying index is switched. If you have an adjustable-rate mortgage, home equity loan or reverse mortgage, now is a good time to revisit the fine print and find out exactly how your rate is determined. For instance, if it’s SOFR- or Treasury-based, nothing will change, but if it’s a LIBOR-based loan, you’ll want to speak to your servicer about when it will change over and what that could mean in your individual situation.
 
 
 

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