Last night after the markets all closed, like a sneak in the night, the FHFA (Federal Housing Finance Agency) announced they would be assessing a 0.5 point fee on ALL refinance loans sold to Fannie Mae and Freddie Mac after September 1, 2020. Since ALL loans closing this month will ultimately be sold to Fannie or Freddie in September, this meant the entire industry and borrowers throughout the country woke up this morning to find this price adjustment immediately affecting their loans.
FHFA stated their reasoning was, “In light of market and economic uncertainty resulting in higher risk and costs incurred by Fannie and Freddie, we are implementing a new loan-level price adjustment.” A more likely reason is that they believe lenders have wide margins and can afford the extra cost (an opinion totally unsubstantiated by fact) and that this will help Fannie and Freddie to build capital reserves in order to end government conservatorship.
For loans that have already been locked this month, this fee will be incurred by the lenders, as this cost was never priced into their borrowers’ rate locks. For all borrowers locking August 13th and going forward, they will see an extra 0.5 point cost built into their pricing.
The timing of this extra assessment could not be worse. The Federal Reserve has been doing everything in their power to keep mortgage rates low in order to help households maintain liquidity and cashflow. This move counteracts the Fed’s intentions. Plus, the mortgage industry is dealing with an extreme amount of volume and rate locks; thus this exacerbates the damage.
Industry groups such as the National Association of Mortgage Professionals and the Mortgage Banker’s Association have already announced plans to lobby to have this extra expense to borrowers rolled back. Let’s hope they succeed.
Warren Goldberg is President of Mortgage Wealth Advisors, a Certified Mortgage Planning Specialist®, and a published author. His interviews include Blog-Talk Radio, Newsday, The Daily News, Anton Press, and the Long Island Herald. Since 1992, he’s been sharing his financial knowledge and wealth-building strategies, including how to properly use your mortgage as a financial tool. His clients regularly express their trust and appreciation by recommending friends and family call when in need of mortgage, real estate, and financial guidance.