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Mortgage

Fannie Mae dropping mortgage modification interest rate

New rate effective on May 14

Fannie Mae is set to lower the benchmark interest rate for its Standard Modification program. Beginning May 14, Fannie Mae will drop its required interest rate for standard modifications from 4.125% to 4%.

Fannie Mae previously raised the benchmark interest rate from 4.0% to 4.125% on April 14, but is now dropping it back down.

Fannie Mae announced the change Thursday in an email sent to its servicers.

According to Fannie Mae’s website, the Standard Modification program is “designed to help those borrowers who are ineligible for the Home Affordable Modification Program.” So to be clear, the new rate does not extend to HAMP borrowers.

In the note sent to servicers, Fannie said that servicers must use the new interest rate for any mortgage loan modification evaluation conducted on or after May 14.

When the program began in Jan. 2012, Fannie’s benchmark interest rate was 4.625%. Fannie lowered the interest rate to 4.25% in Sept. 2012, before dropping it to 4% on Dec. 1, 2012.

The interest rate stayed at 4% until Sept. 2013, when Fannie raised it back to 4.625%, before dropping it back to 4.5% in July 2014.

The interest rate progressively dropped from October 2014 until February 2015, falling from 4.5% to 4%, before Fannie raised it in April, but now, citing “prevailing market rates,” Fannie is dropping it again.

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