If you’ve been wondering when the right time to refinance your home is, there’s a new reason you may want to consider doing it now. Beginning December 1, 2020, the Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac, will implement a 0.5% fee for any refinance loan sold to them.
The Adverse Market Refinance Fee is necessary to “cover projected COVID-19 losses of at least $6 billion at the Enterprises (Fannie Mae and Freddie Mac),” a recent FFHA press release stated. “Specifically, the actions taken by the Enterprises during the pandemic to protect renters and borrowers are conservatively projected to cost the Enterprises at least $6 billion and could be higher depending on the path of the economic recovery.”
Among the losses the FHFA is expecting include the following:
- $4 billion in loan losses from forbearance defaults.
- $1 billion in losses from foreclosure moratorium losses.
- $1 billion in forbearance expenses and servicer compensation.
The fee is assessed to the lender when they sell the loan to Fannie Mae or Freddie Mac and charged back to the borrower as an increase in rate, adding an estimated 0.125 to 0.25 percentage points. Some have speculated the rate increase could be as much as 0.375 points. In terms of how much money the fee adds to a refinance loan, it can be hundreds, even thousands of dollars.
One good news is that the fee will not be assessed on loans under $125,000 (that’s the loan amount, not the home's value). HomeReady and HomePossible loans will also be exempt from the fee, as these are government-backed loans designed to help low-income borrowers.
If you have been considering a refinance, now may be the right time to get the ball rolling. Call the NASB refinance experts at 888-661-1982 or click here to schedule an appointment.
