The large mortgage backing entities of Fannie Mae and Freddie Mac are dropping a fee on mortgage refinances that was instituted during the pandemic at the end of 2020. Dropping this fee is lowering the cost for borrowers to take out a refinance mortgage loan on their home.
Adverse Market Fee on Refinances has Been Dropped
Fanny Mae and Freddie Mac were charging lenders a 50 basis point fee for all refinance loans that were delivered to the two mortgage giants for backing. This fee was designed to cover losses projected as a result of the pandemic and it was being passed on to any borrowers seeking a refinance loan on their mortgage.
The acting Federal Housing Finance Agency director Sandra Thompson said in a statement recently that the COVID-19 pandemic has financially exasperated America’s affordable housing crisis and that eliminating the adverse market refinance fee will help many families to take advantage of a lower interest rate and help them to save more money at a time where they truly need to.
She also stated that it is the FHFA’s priority to support affordable housing while simultaneously protecting the safety and soundness of enterprise. Many lenders and other professionals across the mortgage Industry are applauding this move as there are several borrowers that decided not to refinance their home when the adverse market fee was set into place in late 2020. This fee added on to refinances gave an increase of an eight percentage point in rate which was enough to increase a loan payment by at least $20 per month over the lifetime of a loan on an average $300,000 loan. That is a significant amount of money over the life of a loan.
This adverse market fee was put into place just as the federal government instituted a massive mortgage bailout program at the start of the pandemic. At the height of the economic shut down roughly 5% of Fannie Mae and Freddie Mac borrowers were in mortgage forbearance programs. And it was expected that many more would be seeking these programs. As of July 13, the number of those in forbearance had fallen to just 2.1% in 2020. As of right now, a total of 1.86 million borrowers remain in Covid forbearance plans, this makes up 3.5% of all active mortgages.
Related: A Refinance can be a great way to update your kitchen before you list
Mortgage rates have just recently dropped again and are now sitting near a five-month low. Applications to refinance mortgage loans have jumped again in the last two weeks according to the Mortgage Brokers Association and they expect this to move even higher with the new additional savings of the adverse market fee being lifted.
Right now is a really great time to refinance your mortgage especially if you can benefit from lowering your current mortgage interest rate by at least one point. There are many people that could even pull out of forbearance programs with this great news about refinance mortgage products.
For more information on a mortgage refinance options in Mission Viejo and California including refinance options, brand new mortgages, commercial mortgages, jumbo loan options, and create opportunities for those who are self-employed please contact me anytime. Adverse Market Fee on Refinances has Been Dropped
More Tips for Refinance Options:
- Can You Refinance a Mortgage on a COVID Forbearance Plan?
- Can Cash-Out Refinances Help Reduce Debt?
- The Basics of No-Closing-Cost Refinances
- Can I Use a Refinance to Buy a Second Home?
- Can I Refinance if I’m Self Employed?
- When Does it Make Sense to Refinance?
- 7 Simple Steps to an Easy Refinance
- How to Refinance a Mortgage on a Rental Property
