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The FHFA has just eliminated unfavorable market refinancing fees, making it cheaper to obtain mortgage refinancing. (iStock)
The Federal Housing Finance Agency (FHFA) announced Friday that it would eliminate unfavorable mortgage market refinancing fees from Fannie Mae and Freddie Mac, making mortgage refinancing cheaper for homeowners.
The elimination will apply to all mortgages as of August 1, 2021. The 50 basis point charge has been set up last year by the Trump administration amid the COVID-19 pandemic, as Fannie Mae and Freddie Mac saw their profits dwindle due to the mortgage giants’ programs to help struggling families during the pandemic.
“The COVID-19 pandemic has financially exacerbated the affordable housing crisis in the United States,” FHFA Acting Director Sandra L. Thompson said in a statement. “Eliminating unfavorable market refinancing fees will help families take advantage of the low interest rate environment to save more money. “
With the removal of controversial fees from the unfavorable refinancing market, many borrowers could save even more money on their home loan through refinancing. Check out Credible to see your options and use a mortgage calculator to see what your new monthly payments would be.
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What Are the Adverse Market Refinancing Costs?
Adverse Market Refinance Fee is a 0.5% fee added in 2020 to refinanced mortgages backed by Fannie Mae and Freddie Mac (roughly 70% of all home loans). It was billed to lenders and usually passed through to homeowners through closing costs, in addition to their loan amount or through an increased interest rate. As a result, borrowers paid $ 500 more for every $ 100,000 they refinanced.
The FHFA said in a statement that the charges “were designed to cover losses predicted by the COVID-19 pandemic” and that the effectiveness of its coronavirus policies warrants “a quick conclusion.” however, many reviewers said the fee was unnecessary, and that Fannie Mae and Freddie Mac were simply taking advantage of the rush to refinance themselves.
With interest rates still at their lowest and unfavorable market refinancing fees removed, more borrowers than ever can now benefit from mortgage refinancing. To see how much you could now save on a refinance, visit Credible to view your personalized rates and compare multiple lenders at once.
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How much will homeowners save with the elimination of refinancing fees?
The median price of a home in the United States is $ 287,148 in May 2021, according to the latest report from Zillow. This would leave homeowners paying an additional $ 1,435 to refinance their home with the addition of the adverse market refinancing fee of 0.5%. Of course, many homeowners do not refinance the full amount of their mortgage because of the payments made and their amount owed decreasing.
This fee amount can be prepaid or added to the loan amount. If homeowners were given the option of adding tuition fees to their loan amount, they would see their monthly payments increase. This would add about $ 4 per month for a mortgage financed over 30 years, and about $ 8 per month for a loan financed over 15 years.
If you want to see how much you could save on your monthly mortgage payment now that refinancing fees are waived and interest rates are at all time lows, visit Credible to get pre-approved in minutes without affecting your credit score. .
Why does the FHFA remove unfavorable refinancing fees from the market?
In June, the The Supreme Court has ruled that the FHFA’s leadership structure was unconstitutional, allowing President Joe Biden to remove then-director Mark Calabria and appoint a new leader. Under the current leadership of Sandra Thompson and Biden’s administration focusing more on affordable housing, the FHFA is making a few changes, rather than putting Fannie Mae and Freddie Mac in place to be removed from government care.
The fees were originally scheduled to go into effect on September 1, 2020, but that date was later pushed back to give lenders more time to prepare. The FHFA started collecting the fees on December 1, 2020.
How to get a low refinance rate
Interest rates are currently on average well below the 3% mark – at 2.88% – for a 30-year fixed-rate mortgage, according to Freddie Mac’s latest primary mortgage market survey. Low rates, combined with the elimination of refinancing fees and rapidly rising home prices, now make the perfect time to refinance. And by comparing multiple lenders, homeowners can realize even greater savings.
You can use an online marketplace like Credible to view multiple mortgage lenders at once or speak to a mortgage expert and get your questions answered.
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Have a finance-related question, but don’t know who to ask? Email the Credible Money Expert at [email protected] and your question could be answered by Credible in our Money Expert column.
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