Fannie Mae, Freddie Mac increase mortgage modification interest rate to highest level in 18 months
Benchmark rate increased to July 2015 level
For the second time in two months, Fannie Mae and Freddie Mac announced that they are increasing the benchmark interest rate for standard mortgage modifications.
While last month’s increase saw Fannie and Freddie increase the standard mortgage modification benchmark interest rate to a level not seen in months, the government-sponsored enterprises said Wednesday that they are increasing the standard mortgage modification interest rate to the highest level in 18 months.
The two straight months of hikes to the standard mortgage modification benchmark interest rate follows a run of Fannie and Freddie dropping the benchmark rate throughout 2016, progressively decreasing it below 4%.
The increases also come after the GSEs dropped the standard mortgage modification benchmark interest rate to its lowest level ever, 3.5%.
Since then, the GSEs increased the benchmark rate from 3.5% to 3.875% in December.
And now, the GSEs are hiking the benchmark rate again, from 3.875% to 4.25%.
The benchmark rate hasn’t been at 4% or above since December 2015. The current rate is also the highest it’s been since July 2015.
The benchmark rate tracks with prevailing market rates, and interest rates have been on the rise since the election, although late week’s report from Freddie Mac showed the first decline in market interest rates since the election.
The standard modification program is “designed to help those borrowers who are ineligible for the Home Affordable Modification Program.”
According to the GSEs, the standard modification program is “designed to help those borrowers who are ineligible for the Home Affordable Modification Program.
Per information posted to Freddie Mac’s website, servicers must use the standard modification interest rate when determining the terms of a standard modification trial period plan, streamlined modification, trial period plan or a capitalization and extension modification for disaster relief trial period plan.
The new 4.25% interest rate takes effect on Jan. 13, 2017.