Refinance Surcharge Delayed Until December 1, 2020
Lauren Nowacki2-minute read
September 21, 2020
Last week, the Federal Housing Finance Agency (FHFA) announced it would postpone its controversial Adverse Market Refinance Fee until December 1, 2020.
While the fee is set to take effect December 1, we expect to see lenders introduce the fee in early October because, with the amount of time it takes for loans to close, loans locked in the month of October would generally be subject to the fee.
So what is the fee and how will it impact your refinance? Read on to learn more.
What Is The Adverse Market Refinance Fee?
As a response to the economic impact and uncertainty caused by COVID-19, the FHFA announced on August 12 that refinances purchased by Fannie Mae and Freddie Mac would include a fee of 0.5% of the loan balance. With this new fee, for example, refinancing a loan of $300,000 would cost an extra $1,500.
The fee was set to take effect on September 1.
However, after receiving pushback from lenders, lawmakers and others in the industry, the FHFA pushed the implementation date back to December 1 and decided to exempt loans that are less than $125,000.
While the postponement will offer some initial reprieve, some experts believe it should be repealed completely due to the timing, since many Americans are in financial distress and the economy is still recovering. However, the government entities involved find this charge necessary, as it helps them recoup at least $6 billion in losses and manage the higher risk of lending at this time.
How The Adverse Market Refinance Fee Could Affect Your Refinance
Homeowners looking to refinance their mortgages may be charged this additional fee, which will be .5% of their loan amount. This is a one-time charge and can still allow clients to take advantage of low interest rates. However, it is still additional money they may have to pay to refinance, making the loan more expensive.
Refinance Today To Avoid The Adverse Market Refinance Fee
If you’re considering refinancing and want to avoid this new fee, now may be the time to refinance your loan. With a refinance, you can lower your payment, shorten your loan term or take cash out. Want to learn more before applying? Check out the refinance resources in our Learning Center or call one of our licensed experts today to get more information.
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