Mortgage Finance Giants to Charge More for Refinancing: Live Updates
The cost of refinancing a mortgage is about to go up and it has nothing to do with the Federal Reserve.
Even as the county’s monetary regulators are keeping interest rates at record lows, two of the nation’s biggest mortgage finance firms just announced they will start charging an additional fee on most home loan refinancings. The 0.5 percent fee announced on Wednesday by Fannie Mae and Freddie Mac will mean that the average homeowner will spend an additional $1,400 to refinance a mortgage.
Fannie, Freddie and their regulator, the Federal Housing Finance Agency, are justifying the new fee as a prudent measure to deal with anticipated losses from the pandemic.
Consumer advocates and banking officials denounced the move as an unfair tax on homeowners who are trying to reduce their mortgage bills to free up money for new spending, which the ailing economy could use.
“It is an indefensible tax on consumers,” said Robert Broeksmit, chief executive of the Mortgage Bankers Association, an industry trade group. “One arm of the government is saying it wants credit to be cheap and another arm is saying it will grab it.”
In a statement, the F.H.F.A. said that Fannie and Freddie requested and were granted “permission to place an adverse market fee on mortgage refinance acquisitions beginning September 1, 2020 until otherwise directed.”
Fannie and Freddie, which are sponsored by the government, do not write mortgages. Instead, they buy mortgages from banks and repackage them into mortgage-backed securities that are guaranteed against default. The guarantee allows banks to maintain relatively low rates on such mortgages, the typical size of which is $280,000.
Since the pandemic started, millions of homeowners with mortgages backed by Fannie or Freddie have sought to defer their payments by a year. Back in April, some in the mortgage industry had predicted that as many as 20 percent of all such borrowers could seek such deferrals, but the number has been lower than expected — one possible reason for the higher refinancing fee. The M.B.A. said that 5.2 percent of mortgages backed by Fannie and Freddie were in forbearance, down from just over 6 percent in recent weeks.
Also in April, the F.H.F.A. had moved to provide long-term relief for the mortgage industry, concerned that a wave of loan payment deferrals would strain financial firms that service loans for investors in mortgage-backed securities. The housing regulator said at the time that mortgage firms had to make just four months of cash payouts to bond investors on mortgages that homeowners have stopped paying. After that four-month period, Fannie and Freddie would assume those obligations, for up to eight more months if necessary.
The new charge on mortgage refinance fees roughly coincides with the start of that commitment by Fannie and Freddie.
Article source: https://www.nytimes.com/live/2020/08/13/business/stock-market-today-coronavirus