The Federal Housing Finance Agency (FHFA) has removed the so-called “unfavorable market refinancing fee”, which has been a huge boon for homeowners looking to refinance their mortgages.
Refinancing fee was implemented in December as a payment method for some pandemic mortgage assistance… The agency calculated the commission by taking 0.5% of the loan balance and adding this to the refinancing costs.
“To help families save more money, lenders will no longer be required to pay [Fannie Mae and Freddie Mac] commission of 50 basis points for the provision of refinanced mortgages “, FHFA said in a press release last week…
The FHFA said the fee and other measures taken in response to the pandemic were “effective enough to ensure an early end” of the fee.
“FHFA expects that those lenders that charged borrowers a commission will return the savings to borrowers,” the agency said in a statement.
“Santa Claus came early for homeowners looking to refinance their mortgages,” Bankrate chief financial analyst Greg McBride wrote in response to the move.
The commission, McBride said, often meant that borrowers’ rates were one-eighth of a percentage point higher than they might otherwise have been. In dollar terms, the effect is relatively small, but for some it is important – about $ 20 per month for a loan of $ 300,000.
McBride was among the critics of this policy.
“When the fee came on the market, the excuse was to pay for the costs of abstinence and relief from the pandemic incurred by Fannie Mae and Freddie Mac,” he said. “But the punished homeowners were not at high risk, didn’t need patience or ease of payment and actually reduced their risk to the mortgage finance market by reducing their tariffs and monthly payments. First, it never passed the odor test. “
McBride wrote that the savings from canceling the commission should go back into the pockets of people with mortgages. However, some lenders may not pass savings on, so it’s important to look at the various lenders and study them, McBride said.