After Sept. 1, owners who refinanced would have been charged a 0.5% surcharge if Fannie Mae or Freddie Mac would be taking over the loan. The surcharge will still go into effect but not until Dec. 1 – and refi loans less than $125K won’t be charged the fee at all.
Faced with pressure from the real estate industry, the Federal Housing Finance Agency (FHFA) announced that it will delay a loan finance fee charged to homeowners who refinance their current loan. FHFA made its original announcement on Aug. 13.
The new “adverse market fee” – a 0.5% surcharge on most refi mortgages – now won’t go into effect until Dec. 1, 2020. The rule impacts most mortgages backed by Fannie Mae and Freddie Mac.
In addition, FHFA says it will exempt refis from the adverse market fee if they’re for less than $125,000, or if homeowners have Home Ready and Home Possible program loans. FHFA says the change will largely help lower-income borrowers who are at or below 80% of their area’s median income.
After FHFA made the Aug. 13 announcement, the National Association of Realtors® (NAR) and a coalition of other housing groups protested the decision in a letter sent to FHFA. They asked FHFA to reevaluate the decision, noting that it would add about $1,400 in extra costs to a refinanced loan averaging $300,000. Homeowners who refinance not only save hundreds of dollars per month, they also reduce their debt-to-income ratio, the letter states.
Forty-one bipartisan members of Congress also signed a letter to FHFA Director Mark Calabria objecting to the fee, which doesn’t have to be paid upfront. In most cases, it could be added to monthly payments and paid over the life of the loan.
The FHFA says it created the fee in the midst of a pandemic crisis to “cover projected COVID-19 losses of at least $6 billion” at Fannie Mae and Freddie Mac. FHFA says it’s looking at an anticipated $4 billion in loan losses due to projected forbearance defaults; $1 billion in foreclosure moratorium losses; and $1 billion in servicer compensation and other forbearance expenses.
With average mortgage rates dipping to record lows in the past few weeks, a number of homeowners have moved to refinance their current mortgage. Refinances generally make up about 65% of all mortgage applications, according to the Mortgage Bankers Association.
Source: National Association of Realtors® (NAR)
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