The combination of a, the COVID-19 pandemic and historically low interest rates have created ideal conditions for homeowners In many parts of the US And starting August 1, refinance offers could get even sweeter.
Mortgage giants Fannie Mae and Freddie Mac have said they will eliminate the adverse market refinance fee for all refinanced mortgages starting next month. The refinancing fee translated into a 0.5% charge on refinanced loans, or approximately $ 500 for every $ 100,000 borrowed.
The government fee was added in December 2020 to allow Fannie and Freddie to recoup some of the losses that government-backed lenders expected to incur during the pandemic. In most cases, lenders passed this fee on to borrowers, which could add thousands of dollars to a refinance. The move was seen as a way to offset lenders’ losses after the placed a on foreclosures and provided homeowners with the option of your mortgage payments.
Although it is not clear that the US economy is on a secure footing yet,have some economists concerned: The removal of this fee is good news for homeowners looking to refinance.
From April to July 2020, when the pandemic was on the rise, approximately 5% of Fannie and Freddie borrowers were enrolled inprograms. Since then, it has dropped to 2%, according to FHFA data. The agency said the success of its COVID-19 policies reduced the impact of the pandemic on Fannie and Freddie’s loans, ensuring an early termination of the fee so that lenders can transfer savings to borrowers.
“The COVID-19 pandemic financially exacerbated the affordable housing crisis in the United States. Removing the adverse market refinance fee will help families take advantage of the low rate environment to save more money,” said Acting Director of the Federal Housing Finance Agency, Sandra L. Thompson, in a Press release. The FHFA was created after the 2008 housing crisis, and the agency acts as conservative on Fannie and Freddie’s mortgages.
Some refinance loans were already exempt from the fee, including homes worth $ 125,000 or less, homes refinanced through Fannie Mae’s Home Ready or Freddie Mac’s Home Possible programs, and government-backed mortgages, including, other loans. Giant mortgages between $ 510,400 and $ 765,000 in some regions were also exempt.
“[The] The FHFA is to be commended for eliminating this fee, “said Mike Fratantoni, chief economist for the Mortgage Bankers Association.” With less than 2% of GSE loans in forbearance and continued home price appreciation resulting in significant borrower value, there’s no need for fairy. ”
Despitein July, refinances were down 60% from January, according to a Black Knight survey. Analysts are hopeful that the removal of fees will boost the housing market. “The recent drop in mortgage rates, as well as the elimination of the fee, should give homeowners who have yet to refinance and save money the opportunity to do so now,” Fratantoni said.