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Last updated on February 3rd, 2021 at 10:18 am
The coronavirus pandemic has put an economic strain on many American homeowners.
Last week the mortgage giants Fannie Mae and Freddie Mac decided to levy an adverse market refinance fee of 0.5% on all new refinance loans.
These fees were levied to cover a $6 billion pandemic-fueled losses for them. It was set to take effect from Sept 1, which has now been delayed by 3 months to Dec 1.
The announcement of adverse market fees came during a shaky economic condition and millions of homeowners facing job insecurity and faced tremendous critics and condemnation by lenders and associations.
However, along with the delay in levying fees on refinancing, it has been declared by FHFA that, borrowers with loan balances below $125,000 will be spared from the fee.
Fannie and Freddie are not lenders themselves instead, they purchase 70% of loans from lenders, package them into mortgage-backed securities, and then sell those securities to investors.
Fannie and Freddie also provide guarantees to investors and advance payments even when borrowers are delinquent on the loans.
The GSEs previously said the fee is necessary “as a result of risk management and loss forecasting precipitated by COVID-19 related economic and market uncertainty.”
According to the latest data from the Mortgage Bankers Association (MBA), refinancing has been the main driver in mortgage lending and a way for homeowners to decrease their monthly bills because of the record-lows rates.
The refinance share of mortgage applications is 64.6%.
Bob Broeksmit, president and CEO of the MBA, said, “extending the effective date will permit lenders to close refinance loans that are in their pipelines and honor the rate lock commitments they made to their borrowers, ensuring that economic relief in the form of record low-interest rates will continue to flow to consumers.”
Many lenders after hearing the news of fees had already raised their rates and many had stopped taking refinance now it would be a temporary relief to many.
Reference Source: Forbes
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