Mortgage

Fannie Mae drops mortgage modification interest rate to lowest level ever

New rate takes effect on Sept. 15

After raising the benchmark interest rate for its standard modification program twice in the last three months, Fannie Mae is set to drop the benchmark rate back down to the lowest level it’s ever been.

Beginning Sept. 15, Fannie Mae will lower its required interest rate for standard modifications from 4.25% to 4%.

The standard modification rate has only been that low three other times since the modification interest rate was first established in Jan. 2012.

The only other times the standard modification interest rate has been 4% were in February and May of this year, as well as December 2012.

In July, Fannie Mae raised its required interest rate for standard modifications from 4.125% to 4.25%. The standard modification rate hadn’t been that high since Nov. 2014.

In June, Fannie Mae increased its standard modification rate from 4% back to 4.125%, which was the designated rate from April 14 through May 14.

And In May, Fannie dropped the interest rate from 4.125% to 4%.

Fannie Mae announced the change Wednesday 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.” Therefore, 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 Sept. 15.

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, dropped it again in May, raised in in June and July, and now, citing “prevailing market rates,” Fannie is dropping it back down again.

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