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During the pandemic when more homeowners were trying to take advantage of historically low mortgage rates the adverse refinance fees made refinancing expensive, which will end on Aug. 1.
Many politicians and people from the industry along with homeowners wanted the FHFA to reverse this fee charged by Fannie Mae and Freddie Mac, the government-backed mortgage financiers.
The 0.5% fee, took effect in December was meant to cover projected losses due to the pandemic, but for homeowners, it added $1,000 or more to the average cost of refinancing.
Kyle Manseau, senior vice president of operations at Allied Mortgage Group, based in Bala Cynwyd, said that because of the additional fees they had to turn away some borrowers who were just on the edge of qualifying for a lower mortgage rate but now couldn’t afford the fee because of their existing debts.
He is relieved that those homeowners now can take advantage of low rates.
Sandra L. Thompson, the agency’s acting director, said by eliminating the fee FHFA is able to support affordable housing while simultaneously protecting the safety of the government-sponsored enterprises.
According to Greg McBride, chief financial analyst at Bankrate, the fee is “ill-conceived” because a borrower refinancing a $300,000 loan would lose z saving of $20 a month.
Mc Bride added, when the fee was introduced in the market it said that it was necessary to pay for the costs of forbearance and pandemic-related payment relief incurred by Fannie Mae and Freddie Mac but the homeowners who suffered were not those that were high risk or were in need of forbearance or payment relief, they were, simply reducing their rates and monthly payments.
Fannie Mae and Freddie Mac charged this fee to lenders, who passed it to homeowners.
McBride advises customers to shop around for lenders, because some agents may still continue to charge extra for refinancing to try to recover money lost due to competition and low rates.
According to the Mortgage Bankers Association close to 65% of mortgage applications, last week were refinanced.
Bob Broeksmit, president and chief executive officer of the association, said that now less than 2% of Fannie Mae and Freddie Mac loans are in forbearance and with continued home price appreciation the fee is not needed.
According to the valuation-focused real estate brokerage HouseCanary homeowners nationwide average 68% equity in their homes.
Which is approximately $282,000 inequity on a $414,000 home, the national average home value.
Robert Humann, chief revenue officer at Credible.com, a marketplace of lenders said, the elimination of the fee is beneficial for the majority of homeowners that have conventional mortgages that now have the opportunity to refinance.
Humann added, even small changes to homeowners’ interest rates are important to a family and individual household budgets.
Reference Source: Inquirer
