The Federal Housing Finance Agency (FHFA) just gave homeowners and lenders a savings opportunity by eliminating the Adverse Market Refinance Fee. Effective Aug. 1, lenders will no longer have to pay Fannie Mae and Freddie Mac a 50-basis point fee for refinance mortgages. 

FHFA enacted the fee in December 2020 to "cover projected COVID-19 losses." According to the agency, the early chop can be attributed to enacted policies that lessened the impact of COVID on consumers and the markets. 

"The COVID-19 pandemic financially exacerbated America's affordable housing crisis. Eliminating the Adverse Market Refinance Fee will help families take advantage of the low-rate environment to save more money," said Acting Director Sandra L. Thompson. "Today's action furthers FHFA's priority of supporting affordable housing while simultaneously protecting the safety and soundness of the enterprises."

The agency expects lenders to pass on any cost savings to borrowers. 

Greg McBride, chief financial analyst at Bankrate, stated the fee often resulted in an increase of one-eighth percentage point in rate, which could add up to $20 per month in "potential savings out of the pockets of borrowers with a $300,000 loan.”

“Repealing this ill-conceived and misappropriated fee is a win for borrowers and lenders alike," said McBride in a statement. "Some of the savings will make it into the pockets of consumers but how much the borrower sees will be dependent on shopping around for the best deal.”

According to the agency, about 2% of GSE loans remained in forbearance in April—down from a high of 5% in May 2020. This is the primary indication the fee is no longer needed according to the Mortgage Bankers Association (MBA). 

“MBA applauds Acting Director Sandra Thompson’s decision to eliminate the Adverse Market Refinance Fee," said MBA’s President and CEO Bob Broeksmit in a statement. "We have called on FHFA to rescind this policy and appreciate that they have reviewed the data and been responsive to our request. With less than 2% of GSE loans in forbearance and continued home price appreciation resulting in significant borrower equity, there is no need for the fee."

“We look forward to continuing to work with FHFA, and other stakeholders, including Congress, on ways to continue to protect homeowners and taxpayers while ensuring a liquid, well-regulated mortgage market,” added Broeksmit.

Liz Dominguez is RISMedia's senior online editor. Email her your real estate news ideas to lizd@rismedia.com. 

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