Fees that made refinancing federally guaranteed mortgages more expensive during the pandemic, as more homeowners tried to take advantage of historically low mortgage rates, will end on August 1.
Local politicians, realtors and mortgage industry groups were among those who wanted the Federal Housing Finance Agency to waive the refinancing fees on home loans guaranteed by backed mortgage financiers Fannie Mae and Freddie Mac. by the government. The 0.5% fee, which took effect in December and intended to cover expected losses from the pandemic, added $ 1,000 or more to the average cost of refinancing.
Kyle Manseau, senior vice president of operations at Allied Mortgage Group, based in Bala Cynwyd, called the elimination of fees “a snap in terms of impact on borrowers and affordability.”
“We had to turn down some borrowers who were about to qualify” for a lower mortgage rate because they had too much debt and couldn’t afford the fees, he said. These homeowners will now be able to take advantage of low rates, he said.
The 30-year fixed mortgage rate averaged 3.11% in 2020 and 2.94% in the first half of 2021, according to an analysis of monthly averages from Freddie Mac.
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The pandemic policies of the Federal Housing Finance Agency and Fannie Mae and Freddie Mac “were effective enough to warrant a quick conclusion” of the additional charges, the agency said in a statement. Sandra L. Thompson, acting director of the agency, said the elimination of the fees “reinforces the FHFA’s priority of supporting affordable housing while simultaneously protecting the safety and soundness” of government-sponsored businesses.
Greg McBride, chief financial analyst at Bankrate, called the charges “ill-conceived.” That meant borrowers refinancing a $ 300,000 loan would lose $ 20 per month in potential savings, he said.
“The rationale for the fees when they first hit the market was that there was a need to pay for the pandemic-related forbearance and payment relief costs incurred by Fannie Mae and Freddie Mac,” McBride said in a statement. “But the punished homeowners were the ones who weren’t at high risk, didn’t need forbearance or payment relief, and in fact reduced their risk to the mortgage market by lowering their rates and prices. monthly payments. He never passed the odor test to begin with.
Fannie Mae and Freddie Mac billed the fees to the lenders, who largely passed the fees on to the homeowners. McBride advised clients to seek out lenders as some agents may see an opportunity to continue charging additional fees for refinancing in an attempt to recoup money lost due to competition and low rates.
According to the Mortgage Bankers Association, about 65% of mortgage applications last week were for refinances.
Bob Broeksmit, president and CEO of the association, said the group looked forward to working with the Federal Housing Finance Agency and lawmakers “on ways to continue to protect homeowners and taxpayers while ensuring a liquid and well-regulated mortgage market “.
“With less than 2% of [Fannie Mae and Freddie Mac] with forbearance loans and continued home price appreciation resulting in significant equity for the borrower, fees are not required, ”Broeksmit said in a statement.
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Homeowners nationwide have an average of 68% of their home equity, according to valuation-focused real estate brokerage HouseCanary. That’s about $ 282,000 in equity on a home of $ 414,000, the national average value of a home.
The elimination of federal refinancing fees “is great news for the majority of homeowners with conventional mortgages who have the ability to refinance,” said Robert Humann, director of revenue at Credible.com, a lender market. Given the uneven economic recovery, he said, even small changes in homeowners’ interest rates “can be very significant for family and individual budgets.”
And because Fannie Mae and Freddie Mac have started charging the fees in response to concerns about the pandemic, canceling it “means they are optimistic about the future and the economy rebounding,” he said. -he declares.
Rates will eventually move higher from their historic lows, he said, so “there is now a very good window of opportunity for people.”
The Philadelphia Inquirer is one of more than 20 news organizations producing Broke in Philly, a collaborative reporting project on solutions to poverty and the city’s push for economic justice. Find all our reports on breakinphilly.org.