Good news for homeowners. Refinancing just became even more affordable.
The Federal Housing Finance Agency (FHFA) is formally eliminating Freddie Mac and Fannie Mae’s much scrutinized adverse market refinance fee.
“Today’s action furthers FHFA’s priority of supporting affordable housing while simultaneously protecting the safety and soundness of the Enterprises,” said FHFA Acting Director Sandra Thompson.
The fee, also known as a refinance tax, was first instiuted December 1st, 2020. The Wall Street Journal interviewed SELFi CEO Joseph Flannery about the adverse action fee back in September 2020.
How much is saved and for which loans?
The adverse market fee applied to conventional/conforming refinance loans that have a loan amount above $125,000.
The fee is 50 basis points.
So for a $500,000 loan amount, that equates to $2,500.
Timing
Lenders pay the adverse market refinance fee to FHFA when they deliver refinance mortgages.
Beginning August 1st, lenders will no longer have to pay the adverse market fee when delivering the refinance mortgage.
Because it takes a few weeks after closing for a lender to deliver the loan to Fannie Mae or Freddie Mac, the fee can be dropped on loans originated today, effective immediately for all new applications.
What about the loans in process?
This depends by lender. SELFi is working closely with it’s lending partners. SELFi has confirmed with Rocket Mortgage and Homepoint that they will remove the fee for all loans in process.
Some lenders are unwilling to remove the fee if the loan is locked.
As always, it’s critical to shop around for your mortgage but especially between now and 8/1.
“The adverse market fee applied to conventional/conforming refinance loans that have a loan amount above $125,000.“
The elimination of the adverse market fee makes refinancing more affordable in 2021.