If you are considering mortgage refinancing, the rates could be even lower

The combination of a housing shortage, the COVID-19 pandemic, and historically low interest rates have created ideal conditions for homeowners to refinance their mortgages in many parts of the United States. And from August 1, refi chords could get even softer.

Mortgage giants Fannie Mae and Freddie Mac have announced that they will remove unfavorable market refinancing fees on all refinanced mortgages starting next month. The refinancing fee resulted in a 0.5% charge on the refinanced loans, or approximately $ 500 for every $ 100,000 borrowed.

Government fees were added in December 2020 to allow Fannie and Freddie to recoup some of the losses that government-backed lenders expected to incur during the COVID-19 pandemic. In most cases, lenders passed these fees on to borrowers, which could add thousands of dollars to a refinance. The move was seen as a way to offset losses to lenders after the CARES Act banned foreclosures and offered homeowners the option to suspend mortgage payments.

While it’s not clear that the U.S. economy is still on a safe footing – spikes in inflation have worried some economists – the elimination of these fees is good news for homeowners looking to refinance.

From April to July 2020, when the pandemic intensified, about 5% of Fannie and Freddie borrowers were enrolled in mortgage forbearance programs. That has since fallen to 2%, according to data from the FHFA. The agency said the success of its COVID-19 policies reduced the impact of the pandemic on Fannie and Freddie’s loans, ensuring an early end to fees so lenders can pass the savings 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 interest rate environment to save more money,” Sandra L. Thompson, acting director of the Federal Housing Finance Agency, said in a statement. Release. The FHFA was created in the aftermath of the 2008 housing crisis, and the agency acts as the curator of Fannie and Freddie’s mortgages.

Some refinance loans were already fee-free, including homes valued at $ 125,000 or less, homes refinanced through Home Ready programs from Fannie Mae or Freddie Mac’s Home Possible, and government-guaranteed mortgages. , including FHA, VA, and USDA loans. Jumbo mortgages between $ 510,400 and $ 765,000 in some areas were also exempt.

Refinancing rates continued to decline in July, with the exception of fixed 10-year loans. The FHFA said it would continue to monitor the housing finance system and make any necessary adjustments.