Dear Readers,
One of the things that has helped the industry in these crazy times was
low interest rates, leading many to refinance their mortgages. Needless to
say, when the Federal Housing Finance Agency directed Fannie Mae and
Freddie Mac to implement an adverse market refinance fee, the entire
industry was concerned.
A coalition of real estate trade groups, including the American Land Title
Association, Mortgage Bankers Association, National Association of Realtors
and Real Estate Services Providers Council issued a statement against the
action. The associations noted that the mortgage market has been able
to withstand many of the severe effects of the pandemic and that recent
refinance activity has helped homeowners lower their monthly payments
and reduce the risk to the GSEs and taxpayers.
The heads of the GSEs, Freddie Mac CEO David Brickman and Fannie
Mae CEO Hugh Frater, wrote a letter explaining their position.
“Contrary to much of the criticism we have received since making this
announcement, this will generally not cause mortgage payments to ‘go up.
The fee applies only to refinancing borrowers, who almost always use a
refinancing to lower their monthly rate,” they wrote.
They noted that homeowners refinance when the interest rate is lower than
the rate they signed up for when they got their loan, and that the difference
must be big enough to save the borrowers money on their interest
payments by getting a new mortgage at the lower rate.
FHFA since has directed the GSEs to delay the implementation date from
Sept. 1 to Dec. 1, 2020. At that time, lenders will be required to pay an
extra 0.5 percent of the loan amount as a one-time charge. The GSEs will
also exempt refinance loans with loan balances below $125,000.
It will be interesting to see what kind of an impact this charge will have on
the market.
Until next time, stay legal.
Andrea Golby
Editor, The Legal Description