Refinance Fee to Take Effect on 12/1/20

We are not short on buzzwords for this past year; unprecedented, social distancing, the new normal — Can we throw “happy hour” into the mix? – If you are a homeowner then you might also include “refi” or “refinance”; we have talked about that a lot this year. Why wouldn’t we? The mortgage interest rates are some of the lowest we have ever seen. In fact, Freddie Mac shows that the interest rates have recently dipped below 3%.

People have flocked to mortgage lenders over the last year to refinance their mortgage for various reasons—from lowering their mortgage payment to borrowing from home equity to pay off debt. Fannie Mae and Freddie Mac are giving us another reason to act sooner rather than later; soon they will start charging a 0.5% “adverse market fee” for refinanced mortgages. This fee is a form of risk management brought on by COVID-19 related economic risk. What could this fee amount to? According to the Mortgage Bankers Association, this would raise the cost of an average mortgage refinance by $1,400.

Originally this fee was to go into effect on September 1^st, however, in a press release last week the Federal Housing Agency delayed these plans to take effect December 1^st. Exemptions were also announced to include mortgages with loan balances below $125,000 as well as Home Possible and Home Ready, affordable refinance programs.

With a new date in sight, those who have not refinanced their mortgage may have more motivation to get started.