The Federal Housing Finance Agency (“FHFA”) announced that the Adverse Market Refinance Fee of 50 basis points (0.500%) will be eliminated for loans delivered to Fannie Mae and Freddie Mac (the “GSEs”) effective August 1, 2021.
As previously reported by DocMagic, the Adverse Market Refinance Fee was announced in August 2020, and implemented by the GSEs for most refinance mortgages above $125,000 in December 2020. The GSEs advised at the time that the new fee was necessary to manage risks and forecasted losses that would result from the COVID-19 pandemic.
However, the pandemic did not bring about the losses that were expected as the GSEs have continued to post gains throughout the pandemic. Also, in April 2021, the GSEs reported that the COVID-19 forbearance rate was down to two percent, from a high of approximately five percent in mid-2020. The FHFA announcement states that the “COVID-19 policies reduced the impact of the pandemic and were effective enough to warrant an early conclusion of the Adverse Market Refinance Fee.”
FHFA’s recently appointed Acting Director, Sandra L. Thompson, stated that “the COVID-19 pandemic financially exacerbated America’s affordable housing crisis. Eliminating the Adverse Market Refinance Fee will help families take advantage of the low-rate environment to save more money.”
