"Santa Claus has come early for homeowners looking to refinance their mortgages"
The Federal Housing Finance Agency announced today that it is eliminating the widely condemned Adverse Market Refinance Fee (AMRF).
Effective August 01, Fannie Mae and Freddie Mac will no longer be charging lenders a 50-basis-point fee when the GSEs deliver refinanced mortgages. The fee was instituted last August to cover losses projected as a result of the COVID-19 pandemic, but the decision sparked major outrage among housing groups.
“The fee had often resulted in an increase of one-eighth percentage point in rate, which was enough to siphon $20 per month in potential savings out of the pockets of borrowers with a $300,000 loan,” claimed Bankrate chief financial analyst Greg McBride.
“The justification for the fee when it was sprung on the market was that it was necessary to pay for the costs of forbearance and pandemic-related payment relief incurred by Fannie Mae and Freddie Mac,” he added. “But the homeowners punished were those that weren’t high risk, weren’t in need of forbearance or payment relief and were, in fact, reducing their risk to the mortgage finance marketplace by reducing their rates and monthly payments. It never passed the smell test to begin with.”
Mortgage organizations appear to be over the moon about the agency’s decision.
“We have called on FHFA to rescind this policy and appreciate that they have reviewed the data and been responsive to our request,” said Bob Broeksmit, president and CEO of the Mortgage Bankers Association. “With less than 2% of GSE loans in forbearance and continued home price appreciation resulting in significant borrower equity, there is no need for the fee.”
The FHFA acknowledged that it is high time to end the fee, as the measure taken by the agency and GSEs has been effective in mitigating the impact of the pandemic. In April, the FHFA announced a new refinance option for low-income borrowers that included a lower interest rate and lower monthly payment. The new refi offering waived the adverse market fee for borrowers with balances at or below $300,000.
“The COVID-19 pandemic financially exacerbated America’s affordable housing crisis. Eliminating the Adverse Market Refinance Fee will help families take advantage of the low-rate environment to save more money,” said FHFA acting director Sandra Thompson. “Today’s action furthers FHFA’s priority of supporting affordable housing while simultaneously protecting the safety and soundness of the Enterprises.”
“Santa Claus has come early for homeowners looking to refinance their mortgages,” McBride said. “Repealing this ill-conceived and misappropriated fee is a win for borrowers and lenders alike. Some of the savings will make it into the pockets of consumers, but how much the borrower sees will be dependent on shopping around for the best deal.”
However, McBride warned that some lenders may use this as an opportunity to pad their own margins that have been squeezed by low rates and heated competition.
“It is important for homeowners to seek out the lenders offering the best terms,” he said.