For the third time this year, Fannie Mae and Freddie Mac are lowering the benchmark interest rate for standard mortgage modifications.
And unlike last time, both of the government-sponsored enterprises are changing their respective benchmark rates at the same time.
Back in July, Fannie Mae announced it was cutting its benchmark interest rate for standard mortgage modifications, but it appeared that Freddie Mac didn’t lower its rate as well.
Normally, Fannie and Freddie raise or lower the benchmark interest rate in sync, but while Fannie sent out a notification to mortgage servicers that it was decreasing the benchmark rate from 4.125% to 4%, Freddie did not.
As it turns out, it just took Freddie a little longer to update its website with the matching interest rate cut.
Now, both of the GSEs are cutting the benchmark rate again – from 4% to 3.875%.
In January, Fannie and Freddie increased the standard mortgage modification benchmark rate from 3.875% to 4.25%, which was the highest the benchmark rate had been since July 2015.
But in May, Fannie and Freddie cut the benchmark rate from 4.25% to 4.125%, and then the GSEs cut it again in July.
And now, they’re cutting it again, to the lowest level of the year.
In fact, the benchmark interest rate hasn’t been this low since December 2016.
While this marks the first time the benchmark rate has been below 4% this year, it’s not the lowest the modification rate has ever been.
That came in August 2016, when the GSEs dropped the standard mortgage modification benchmark interest rate to the lowest level ever, 3.5%.
The standard mortgage modification rate applies only to certain loan programs.
Here’s how Freddie describes it:
Servicers must use the Freddie Mac Standard Modification (Standard Modification) interest rate, a fixed interest rate provided by Freddie Mac, when determining the terms of a Standard Modification Trial Period Plan, Freddie Mac Streamlined Modification (Streamlined Modification) Trial Period Plan or a Capitalization and Extension Modification for Disaster Relief (Disaster Relief Modification) Trial Period Plan. In these situations, the same Standard Modification interest rate used for the Trial Period Plan must also be used for the final modification.
The new benchmark rate of 3.875% takes effect on Sept. 15, 2017.