The Federal Housing Finance Agency (FHFA) announced today that Fannie Mae and Freddie Mac will lift the hotly contested 0.5% refinancing fee from August 1 to help families reduce housing costs.
To help households save more money, lenders will no longer be required to pay government-sponsored businesses a 50 basis point commission when they provide refinanced mortgages.
The commission introduced on December 1, 2020 added 0.5% to the total refinancing cost. For example, if borrowers refinanced a $ 300,000 loan, the premium meant they would have owed an additional $ 1,500.
The markup is intended to cover losses projected as a result of the pandemic. However, the success of the Covid-19 policy reduced the impact of the outbreak and was effective enough to ensure that refinancing commission payments in the market end as soon as possible. FHFA expects lenders that charged borrowers a commission to return the savings to borrowers.
“The Covid-19 pandemic has financially exacerbated America’s affordable housing crisis,” said Sandra Thompson, acting director of FHFA. “Eliminating unfavorable market refinancing fees will help families take advantage of lower rates to save more money. Today’s actions advance FHFA’s priority to support affordable housing while protecting the safety and resilience of businesses. ”
The vast majority of borrowers Fannie Mae and Freddie Mac have successfully broken out of Covid-19 tolerance. In April, only 2% of single family mortgages guaranteed by businesses remained on hold, up from a high of around 5% in May 2020.
When the royalties were announced last August, Vince Malta, former president of the National Association of Realtors, said: “This is very disappointing and absolutely wrong policy at the wrong time. This fee could cost homeowners thousands of dollars, destabilizing the market and making it impossible. “
But now Greg McBride, chief financial analyst at Bankrate, said: “Santa Claus came early for homeowners looking to refinance their mortgages.”
He said: “The commission often resulted in an one-eighth percentage point increase in the rate, which was enough to siphon $ 20 a month of potential savings out of the pockets of borrowers with a $ 300,000 loan.”
McBride added: “When the fee hit the market, the excuse was to pay for the abstinence and pandemic-related payment relief costs incurred by Fannie Mae and Freddie Mac. But it punished homeowners who were not at high risk, did not need to delay or ease payments, and actually reduced their risk to the mortgage finance market by lowering their rates and monthly payments. First, it never passed the odor test. “
The Mortgage Bankers’ Association released a statement from MBA President and CEO Bob Braxmith praising the FHFA statement:
“The MBA welcomes Acting Director Sandra Thompson’s decision to waive unfavorable refinancing fees in the market. We have encouraged FHFA to withdraw this policy and are grateful that they reviewed the data and responded to our request. With less than 2% deferral of GSE loans and continued increases in home prices resulting in significant borrower capital, no fee is required. ”
He added: “We look forward to working with FHFA and other stakeholders, including Congress, on ways to continue to protect homeowners and taxpayers while providing a liquid, well-regulated mortgage market.”
Holden Lewis, a housing and mortgage specialist at NerdWallet, said the removal of the commission is good news for homeowners who were wary of refinancing.
“This will lead to a decrease in interest rates on refinanced mortgages by about one-eighth of a percentage point,” Lewis said. “That might be enough to tip some homeowners in favor of refinancing.”
He added: “The Federal Housing Finance Agency announced this right after mortgage fixed rates fell to their lowest level since February. This is a great moment, and you don’t often applaud a government agency for timing well. “