Refi fee is delayed, but what are lenders doing about loans that were already locked?
The Federal Housing Finance Agency announced on Tuesday it is delaying the implementation of its adverse market refinance fee to Dec. 1 – three months past its intended start date. But what about lenders whose refi loans were locked with closing dates after Sept. 1 and carrying the 50bps LLPA?
Phil Shoemaker, president of originations at Home Point Financial, said that for every Home Point borrower who had the adjustment added, the fee will be removed. However, with several thousand loans in the pipe, it does require staff to go in and manually touch every single loan to reverse the fee.
According to Home Point, the adjustment has been removed from the pricing for new locks as long as the term does not have a lock expiration date greater than Nov. 15, 2020.
“There are loans that are locked on a 90-day or so lock, where the lock is actually long enough that by the time the loan delivers the fee will be in place. So, we’ve identified a cut off where if the lock expiration is past this point the fee will apply,” Shoemaker said.
Home Point will credit its wholesale and correspondent clients the 50-basis point adverse market fee for loans locked between Aug 13. And Aug 15., unless the loan has already been purchased.
United Wholesale Mortgage sent an internal letter to its community that stated in most cases, it will be able to return the money to borrowers. How it is able to make the 50bps adjustment depends on the current status of the loan.
For those not locked, the adjustment is off the rate sheet until further notice. For those that are locked and not yet approved with conditions (AWC) or locked and in AWC, UWM removed the 50bps adjustment. Loans cleared to close or those already in closing but desire to remove the 50bps were encouraged to contact the Lock Desk immediately. In those cases, borrowers will be made aware that docs will have to be redrawn and the closing will be delayed.
Brian Covey, vice president of regional production at loanDepot, said the lender removed the 50 bps LLPA on conventional refinances as soon as the extension was announced.
“It varies on the current pipeline as some refinance customers with conventional financing were not locked so we are obviously encouraging them to lock given this info and based on their situation,” Covey said.
While the adverse-market fee came off as a shock to some mortgage originators, and experienced push back from several in the industry, the GSEs’ responded that that the “modest fee” would help the enterprises assist families during the pandemic.
But with rates continuing to hover below 3% and demand refusing to slow down, some lenders were in agreement that the industry will have to brace itself for the fee sooner or later.
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