Consumers will have to pay more to refinance their home loans after Fannie Mae and Freddie Mac (the Agencies) announced that they are raising fees for lenders on the loans. The change is designed to shield the two entities from the additional risk brought on by the coronavirus pandemic. In a letter to lenders, Fannie Mae specifically cited “market and economic uncertainty resulting in higher risk and costs.” The price adjustment adds 0.5% of the loan amount to the consumer’s cost. That amounts to $1,400 on the average loan.
After a delay of the effective date, the fee will be in effect for loans delivered to the Agencies by December 1. Because of processing times, this means that the fee will basically apply to most refinances that have not already made application with their lender. In announcing the delay, an exemption for smaller loan amounts below $125,000 was also added. The move was met with strong criticism from the industry, seen as a slap in the face of the one sector of the economy that has been thriving during the pandemic.
“This announcement is bad for our nation’s homeowners and the nascent economic recovery,” wrote Bob Broeksmit, CEO of the Mortgage Bankers Association, in a statement. “Requiring Fannie Mae and Freddie Mac to charge a 0.5% fee on refinances they purchase will raise interest rates on families trying to make ends meet in these challenging times.”