So this summer we had a short period where lenders were collecting a new Adverse Market Refinance Fee required by FHFA. That went away after FHFA decided to delay the fee to December 1st. Now it’s coming back! This is a fee charged by lenders on any loan sold to Fannie or Freddie.
The fee is equal to .5% of the loan amount. It won’t be a fee you actually pay at closing but will be rolled into the interest rate. This could raise your interest rate by .125-25%. The fee is being charged on all loan amounts over $125,000 and will not apply to HomeReady or HomePossible loans. So you may still be able to avoid it depending on your loan amount and type.
The fee is due for all loans that are sold to Fannie or Freddie on or after December 1, 2020. However, it takes a while to get a refinance completed so most lenders will start charging this fee on loans locked around October 1st. If you are in the process of refinancing, you will want to make sure you talk to your lender about this fee. I’m trying to make sure my clients are locked before Oct 1st to avoid the fee and also make sure we are closing well before December 1st to allow the loans to get sold.
There is always a chance that the fee will go away again – there is an election coming up and that could affect the fee. The fee is being charged to help offset projected Covid-19 losses of up to $6 billion according to FHFA (Federal Housing Finance Agency). Some of the losses are due to relief packages that were passed allowing homeowners to skip mortgage payments without penalty and prevented lenders from foreclosing on any delinquent loans.
Interest rates are still great – and truly even with the extra fee, rates should still be close to historic lows. This means if you can’t get your refinance done before the fee hits, you will still be ok – but you may see a slightly higher rate. If a refinance seems to make sense, you may want to talk to your lender sooner than later! Feel free to call me with questions!
Leslie Vanderwerf, NMLS ID#335509, Cross Country Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
