Market Refinance Fees Announced by Fannie Mae & Freddie Mac
The Markets Extreme Frustration
Fannie Mae & Freddie Mac announced August 12th that they would be implementing a 0.5% fee on all cash-out and non-cash-out refinance transactions that would go into effect on September 1st.... Calling it an Adverse Market Fee due to Related losses and an uncertain Economic Market brought on by COVID-19.
This means that all Conventional refinance transaction would Immediately become more expensive.
Example: for every $100,000 you owe on your mortgage when refinancing your home, you would pay an additional $500 fee (0.5% of the amount being refinanced).
If you consider that the median home price during the 2nd. quarter of 2020 was $291,300, it means the fee would cost the average homeowner an additional $1,456 if looking at refinancing.
The implementation of this fee was met with questions and extreme frustration by the housing industry, especially when the announcement came with no advanced warning, and because refinancing opportunity is and has been one of the few economic bright spots homeowners have had during the pandemic. Spokesman for The White House also weighed in to state that it had “serious concerns” following the announcement of the fee.
Thirteen days following Fannie and Freddie’s initial announcement, the FHFA directed Fannie & Freddie to postpone implementation of this fee for 90 days with a new effective date of December 1st. Fannie Mae’s Home Ready and Freddie Mac’s Home Possible programs that are refinanced below $125.000, would not be subject to the 0.5% fee.
On December 1st, this fee will be implemented, which means that transactions would need to be completed and delivered before that date. Rule of thumb- Homeowners will need to likely submit their loan application for refinance and lock in their interest rate no later than mid-October in order to complete and close on their refinance in time to avoid this fee while at the same time take advantage of record low interest rates.
Share this article with those you know who may be thinking of refinancing. It could save them in the long run a good bit of money.