If you have clients who plan on refinancing their mortgages this year, make sure they’ve already locked in their rate.
Starting Sept. 1, refinancing fees on mortgages securitized by Fannie Mae and Freddie Mac will increase 0.5% as the mortgage giants impose an “adverse market refinance fee” on lenders due to market and economic uncertainty related to the COVID-19 pandemic that is increasing risks and costs. Lenders will then likely pass the fee onto borrowers through higher interest rates.
Even though there’s still some time before Sept. 1, lenders are not likely to offer new loans now that don’t incorporate the additional fee in their rates, says Greg McBride, chief financial analyst for Bankrate.com.
The additional fee will add $1,400 to mortgage payments for the average consumer, according to a statement from a coalition of 20 financial, housing and public interest organizations, including the Mortgage Bankers Association (MBA), American Bankers Association and Center for Responsible Lending.
They lambasted the move as a contradiction of “the administration’s recent executive actions urging federal agencies to take all measures within their authorities to support struggling homeowners.”
In mid-June, Fannie Mae and Freddie Mac extended a moratorium on single-family foreclosures and evictions, which was set to expire on June 30, to Aug. 31. “During this national health emergency no one should worry about losing their home,” said Mark Calabria, director of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac.
The additional refinancing fee also “contradicts” the policy of the Federal Reserve, which has been buying $40 billion in agency mortgage-backed securities per month to help reduce the cost of buying or refinancing a home and stimulate the broader economy, according to the statement from the MBA and other organizations. “This action … raises those costs, contradicting and undermining Fed policy.”
“This is nothing more than siphoning savings out of consumer pockets and into the pockets of Fannie Mae and Freddie Mac,” McBride said, adding that low mortgage rates have been one of the few bright spots in the current recessionary economy.
Despite the refinancing fee increase, refinancing rates remain low, at 3.41%, but that’s up from 3.17% in the previous week, according to Bankrate.