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Fannie Mae and Freddie Mac are removing fees on mortgage refinances instituted during the pandemic, reducing costs for borrowers, the Federal Housing Finance Agency said on Friday.
Fannie and Freddie were charging lenders a 50 basis point fee for all loans made to the two mortgage giants. The fees, designed to cover projected losses from the pandemic, were passed on to borrowers.
“The COVID-19 pandemic has financially exacerbated the affordable housing crisis in the United States. Removing unfavorable refinancing fees from the market will help families take advantage of the low-rate environment to save more money,” Sandra Thompson, acting director of the Federal Housing Finance Agency, said in a statement. His agency is Fannie and Freddie’s restaurateur.
“Today’s action reinforces the FHFA’s priority of supporting affordable housing while simultaneously protecting the safety and soundness of businesses.”
The mortgage industry applauded this decision.
“Santa Claus came early for homeowners looking to refinance their mortgages,” said Greg McBride, chief financial analyst for Bankrate.com. “The fees had often caused the rate to rise by an eighth of a percentage, which was enough to siphon off $ 20 per month in potential savings from borrowers’ pockets with a $ 300,000 loan.”
The fees were put in place just as the federal government instituted a massive mortgage bailout program at the start of the pandemic. At the height of the economic crisis, around 5% of Fannie and Freddie’s borrowers were on mortgage forbearance programs. As of July 13, that share had fallen to 2.1%, according to Black Knight.
In total, 1.86 million borrowers remain on Covid forbearance plans, representing 3.5% of all active mortgages. For FHA / VA the share is 6.2% and for private label and bank book loans the share is 4.0%
Mortgage rates recently fell and are now near a five-month low. Refinancing requests have jumped over the past two weeks, according to the Mortgage Bankers Association, and will likely increase further with these additional savings.
“We have asked the FHFA to revoke this policy and we are grateful for reviewing the data and responding to our request,” said Bob Broeksmit, president and CEO of the association. “With less than 2% of GSE loans in forbearance and continued home price appreciation resulting in significant equity for the borrower, the fees are unnecessary.”
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