Earlier this week, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (the Enterprises) will eliminate the Adverse Market Refinance Fee for loan deliveries effective August 1, 2021.
FHFA enacted the fee in December 2020 to “cover projected COVID-19 losses.” According to the agency, the fee was designed to cover losses projected as a result of the COVID-19 pandemic.
To allow families to save more money, lenders will no longer be required to pay the Enterprises a 50-basis point fee when they deliver refinanced mortgages.
The success of FHFA and the Enterprises' COVID-19 policies reduced the impact of the pandemic and were effective enough to warrant an early conclusion of the Adverse Market Refinance Fee. FHFA's expectation is that those lenders who were charging borrowers the fee will pass cost savings back to borrowers.
"The COVID-19 pandemic financially exacerbated America's affordable housing crisis. Eliminating the Adverse Market Refinance Fee will help families take advantage of the low-rate environment to save more money," said Acting Director Sandra L. Thompson. "Today's action furthers FHFA's priority of supporting affordable housing while simultaneously protecting the safety and soundness of the Enterprises."
The vast majority of Enterprise borrowers have successfully exited COVID-19 forbearance.
In April, approximately 2 percent of single-family mortgages guaranteed by the Enterprises remained in forbearance, down from a high of approximately 5 percent in May 2020.
FHFA will continue to monitor the housing finance system, making policy adjustment in coordination with the Enterprises as necessary.
The fee often resulted in an increase in a person’s interest rate, usually about one-eighth of a percentage point, which could add up to about an increase of approximately $20 a month for a $300,000 loan.
Lauren Bunting is a Broker with Keller Williams Realty of Delmarva in Ocean City, Maryland.
