Mortgage Refinancing to Get a Bit More Expensive
WASHINGTON – It will cost more to refinance a mortgage after Sept. 1.
Fannie Mae and Freddie Mac intend to assess a new fee to cushion themselves from losses on refinanced mortgages they guarantee. The government-sponsored enterprises (GSEs) that back nearly half of the $11 trillion U.S. mortgage market, say they will charge lenders an extra fee starting in September.
The fee applies to most loans the GSEs will buy – generally ones that borrowers have refinanced to lock in a lower interest rate.
The fee is equal to 50 basis points – half a percentage point – on each loan Fannie and Freddie guarantees, or about $1,400 on the average mortgage backed by the companies, according to industry estimates.
Borrowers don’t have to pay the new fee upfront, however, and it will likely pan out to be only a modest increase in their monthly costs as it’s paid over the lifetime of the loan. Lenders say the fee isn’t correlated with the risk of refinanced loans or borrower’s credit scores. It would simply be passed on to consumers.
National Association of Realtors® President Vince Malta issued the following statement in response to Wednesday’s announcement by Fannie Mae and Freddie Mac of plans to impose a new 0.5% adverse-market fee on mortgage refinances starting September 1:
“This is very disappointing, and the absolute wrong policy at the wrong time,” Malta says. “This fee could cost homeowners thousands of dollars, which will destabilize the market and take away opportunity. It also directly contravenes the administration’s own directives for federal agencies to do no harm to homeowners during the coronavirus crisis.”
He says communities already suffering in underserved markets will be hurt the most.
“Home values and residential real estate are a rock for the American economy right now. We should do everything we can to lower costs for households during this crisis, not make homeownership more expensive,” Malta adds.
Bob Broeksmit, CEO of the Mortgage Bankers Association, says Fannie and Freddie reported a combined $4.33 billion in profits in the second quarter. “For the GSEs to add a 50 basis-point surcharge on refinances when the nation is struggling with the greatest economic downturn since the Great Depression is outrageous,” he says.
A representative for the Federal Housing Finance Agency, which oversees Fannie and Freddie, says the companies requested the “adverse market fee.”
Source: Wall Street Journal (08/12/20) Ackerman, Andrew; and INFORMATION INC., Bethesda, MD (301) 215-4688
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