Market Update 8/17/20
August 17, 2020
Last week the FHFA (Federal Housing Finance Agency) announced it will be implementing a new fee on refinances sold to Fannie Mae and Freddie Mac after September 1st. This fee adds 0.5% of the loan amount to the consumer’s cost to refinance (i.e. $1,250 on a $250k loan). The average consumer refinancing will be looking at a fee of around $1,400.
In the midst of a refi boom, families financially impacted by Covid-19 looking to lower their monthly mortgage payment will be looking at a higher price tag. This increase in fees has the potential to stunt economic recovery, as the mortgage industry has continued to thrive throughout the pandemic. Refinances have been increasing for months, and many homeowners have taken advantage of the historically low rates to lower their monthly payments or utilize necessary cash-out refinance funds to weather economic hardship.
“Based on their projected COVID-related losses, Fannie Mae and Freddie Mac (the Enterprises) requested, and were granted, permission from FHFA to place an adverse market fee on mortgage refinance acquisitions,” was the statement provided by the FHFA as the reason for the new price adjustment. The impact of this decision will become more clear as we move into fall and examine the number of refinances and the state of economic recovery.
Despite this change in the housing market, the good news is this will not affect purchases and interest rates still remain historically low.
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