Fannie Mae and Freddie Mac are rolling out a new ‘adverse market fee’ in light of the coronavirus pandemic. Critics of the move say it will cost homeowners thousands of dollars
A new fee imposed by Fannie Mae and Freddie Mac will change the calculus of whether it’s advantageous to refinance your mortgage.
If you’re in the process of refinancing your mortgage, you may end up paying more than you expected.
Fannie Mae FNMA, -2.70% and Freddie Mac FMCC, -1.83% said Wednesday that they will start charging a 0.5% “adverse market fee” on all refinances, including both cash-out and non-cash-out refis. The new fee goes into effect Sept. 1.
“As a result of risk management and loss forecasting precipitated by COVID-19 related economic and market uncertainty, we are introducing a new Market Condition Credit Fee in Price,” Freddie Mac said in a notice to lenders.
Fannie Mae noted that its forecasts regarding the impact of COVID-19 could change substantially, making it difficult to predict the pandemic’s impact on the government-sponsored enterprise.
The Federal Housing Finance Agency, which regulates Fannie and Freddie, said the two government-sponsored enterprises “requested, and were granted, permission from FHFA to place an adverse market fee on mortgage refinance acquisitions.”
Fannie and Freddie are not lenders themselves — instead, they purchase loans from lenders, package them into mortgage-backed securities and then sell those securities to investors. Fannie and Freddie also provide guarantees to investors and advance payments even when borrowers are delinquent on the loans.