Editor’s Note: The The Federal Housing Finance Agency has announced that these fees will end August 1, 2021.
After strong criticism of new fees for homeowners refinancing their mortgage, the Federal Housing Finance Agency said it would delay the move for three months. The 0.5% fee on refinancings now begins on December 1 rather than September 1, the agency said today.
The new fees will be imposed on loans resold to Fannie Mae and Freddie Mac, the mortgage giants that buy about two-thirds of all US mortgages. In addition to delaying the fee by 0.5%, the FHFA said Fannie and Freddie would exempt loans under $ 125,000 from fees, as many mortgages of this size are held by moderate-income borrowers.
A number of business groups for the housing industry, including the National Association of Realtors and the Mortgage Bankers Association, had opposed the charges. Bankrate’s chief financial analyst Greg McBride, CFA, had asked the regulatory agency to waive the fees entirely.
“While not as good as repealing it altogether, it’s definitely better than the capers they pulled when they originally announced it without warning,” McBride said.
The Mortgage Bankers Association also welcomed the compromise. “The extension of the effective date will allow lenders to complete the refinancing of outstanding loans and honor the rate-freeze commitments they have made to their borrowers, thereby ensuring economic relief under the form of record interest rate will continue to be paid to consumers, ”he added. the group said in a statement.
Fannie and Freddie titled the new charge an “unfavorable market refinancing fee,” indicating that government-backed companies were affected by the coronavirus pandemic. On Tuesday, the FHFA said Fannie and Freddie would lose $ 6 billion from this recession, including $ 4 billion in expected defaults.
“The fees are needed to cover expected COVID-19 losses of at least $ 6 billion in businesses,” the agency said in a statement. “Specifically, the steps businesses took during the pandemic to protect tenants and borrowers are expected to cost businesses at least $ 6 billion and could be higher depending on the path of economic recovery. “
Low rates create a refinancing frenzy
Mortgage rates have plunged to record levels this year, triggering a wave of refinancing activity. Many lenders market 30-year fixed rate mortgages with rates below 3%.
However, the points of origin and closing costs can quickly add up. These expenses typically add 2-5% to the cost of a loan, and the new 0.5% fee will add an extra layer of cost for homeowners deciding if refinancing makes sense.
Fannie and Freddie announced the new fees on August 12. They only apply to refinances, not to the purchase of mortgages. Mortgage brokers, lenders and real estate agents have bristled at short notice and the sheer size of fees. On a loan of $ 300,000, the fees will add $ 1,500 in fees.
“Contrary to most of the criticism we’ve received since this announcement, this generally won’t increase mortgage payments,” CEOs Fannie and Freddie said last week in a joint statement. “The fees only apply to refinanced borrowers, who almost always use refinancing to lower their monthly rate.”