The market mortgage interest rates aren’t the only ones on the way up, as Fannie Mae and Freddie Mac announced Wednesday that they are increasing the benchmark interest rate for standard mortgage modifications to a level not seen in 10 months.
Last week, Freddie Mac announced that the market mortgage interest rates, as captured in its weekly applications survey, just hit their highest level of 2016, checking in at 4.08%.
Now, Fannie and Freddie are increasing the standard mortgage modification benchmark interest rate, which the government-sponsored enterprises base on prevailing market rates.
Prior to this increase, the standard mortgage modification benchmark interest rate was at its lowest level ever, 3.5%.
Beginning December 14, Fannie Mae and Freddie Mac will increase the standard modification interest rate from 3.5% to 3.875%.
The increase will be the first time that the GSEs increased the modification benchmark interest rate in 2016.
The increase bypasses several increments that the benchmark interest rate hit as it dropped throughout 2016.
In November 2015, Fannie and Freddie lowered the benchmark rate below 4% for the first time, to 3.875%.
But that decrease was quickly followed by the benchmark rate being increased back up to 4% in December 2015.
Since then, Fannie and Freddie dropped the benchmark rate on multiple occasions, first back to 3.875% in February, then to 3.75% in March, and to 3.625% in May, and then to 3.5% in August.
Now, the GSEs are skipping those intervals and going back up to 3.875%.
According to the GSEs, 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.
According to 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 3.875% interest rate takes effect on Dec. 14, 2016.
