Fannie Mae & Freddie Mac Change Mortgage Mod Rate Again

Just as servicers were adjusting to the lowest ever standard mortgage modification interest rate established in November 2015 by Fannie Mae and Freddie Mac, the GSEs opted to raise it back up.

Both Fannie and Freddie recently announced that the standard modification interest rate will return to 4 percent.

Starting on December 14, 2015, Fannie Mae will raise its standard modification interest rate from 3.875 percent to 4 percent. Meanwhile, Freddie Mac will raise its standard modification interest rate by the same amount also beginning on December 14, 2015.

In November, Fannie Mae and Freddie Mac announced that the standard mortgage modification interest rate will be under 4 percent for the first time ever since the benchmark was established in January 2012. Both GSEs lowered the modification interest rate to 3.875 percent.

Servicers can still use this rate until December 13, 2015.

The GSEs lowered the standard modification interest rate to 4.25 percent to 4 percent in October, where the rate had been from July 2015 to September 2015.

"By adjusting the interest rate from time to time, you will have the ability to provide borrowers with a rate that aligns more closely to current market conditions," Freddie Mac said in its Standard Modification FAQs.

According to Fannie and Freddie, servicers must use the current Fannie Mae Standard Modification Interest Rate when evaluating a borrower for a conventional mortgage loan modification, excluding Fannie Mae HAMP Modifications.

Freddie Mac's Guidelines to Using the Interest Rate:

• Visit this Web page on or after the fifth business day of every month for the new interest rate.
• Implement the new interest rate on the tenth business day of the month, but no sooner.
• Use the interest rate that is in effect and posted on Freddie Mac's website when evaluating a borrower until the mandatory effective date of the new interest rate.
• Ensure the interest rate used to determine final modification terms is the same fixed rate that was used when determining eligibility for the Trial Period Plan and calculating the Trial Period payment – even if the interest rate that must be used for new Trial Period Plan evaluations subsequently changes.