Fannie Mae and Freddie Mac eliminating 50-basis point refinancing fee. No refinancing fee on loans backed by Fannie/Freddie as of August 1, 2021.
No More Mortgage Refinancing Fees as of August 1, 2021
The Acting Director of the Federal Housing Finance Agency Sandra Thompson announced that Fannie Mae and Freddie Mac are no longer collecting the Adverse Market Refinance Fee as of August 1, 2021.
This 50-basis point refinancing fee was originally intended to help Fannie and Freddie cover at least $6B in anticipated pandemic losses. But, now that the vast majority of borrowers with mortgages backed by Fannie and Freddie have exited forbearance (due to) the success of the COVID relief programs, Thompson said that this refinancing fee is no longer needed.
Thompson Expects Fee Cancellation to Help Borrowers Save Money
Thompson fully expects that lenders will pass along any cost savings that result in the elimination of this refinancing fee on to borrowers. Such cost savings would be equal to $500 for every $100,000 refinanced. For example, a borrower refinancing a $280,240 mortgage (80% of a median home price in May of $350,300) would save approximately $1,400 with the elimination of this fee.
Greg McBride, chief financial analyst with Bankrate, believes this fee cancellation is a win/win for borrowers and lenders as long as lenders don’t use this fee cancellation to “pad their profit margins.” McBride said, “Repealing this ill-conceived and misappropriated fee is a win for borrowers and lenders alike. Some of the savings will make it into the pockets of consumers but how much the borrower sees will be dependent on (borrowers) shopping around for the best deal.”
Number of Borrowers in Forbearance Dropped More Than 50% in April 2021
Due to COVID relief packages, the percentage of single-family mortgages guaranteed by Fannie and Freddie that were in forbearance dropped to 2% in April. When comparing the now even less than 2% of single-family mortgages currently in forbearance to the high of 5% in May 2020, the timing of this refinancing fee cancellation seems more than warranted.
Thanks to the Feeral Housing Finance Agency, Bankrate and Inman.