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Refinance Rates

FHFA kills adverse market fee

Mortgage industry cheers elimination of 50 basis point fee on most refinanced mortgages

For those that have not refinanced during these historically low rates in 2020 and into 2021, now is your chance again as we expect refinance rates to fall further into the 3rd quarter of 2021.

The Federal Housing Finance Agency (FHFA) in late 2020 applied an ‘adverse market’ fee to all conforming conventional refinance loans that impact interest rates lenders offer universally.  Starting in August of 2021 this fee will be removed, resulting in conforming conventional refinance rates (backed by Fannie Mae and Freddie Mac) to slightly decrease. 

The goal on a refinance is to reduce the interest rate around 0.75% to 1% or more if the recapture pencils at low or no cost.  Many conforming/conventional refinances are getting appraisal waivers also which results in no $ out of pocket, but we share the full rate sheets and benefit analysis based off expected loan life to compare to your existing loan.

Scenarios for those who may benefit:

  • If you have a 30 year conforming conventional rate around 3.625% or higher
  • If you have a 20 year fixed conventional rate around 3.5% or higher
  • If you have a 15 year fixed conventional rate around 3.125% or higher
  • If you have a VA or FHA rate at or above 3.0%
  • If you’re trying to remove PMI, or refinance out of FHA to conventional
  • If you’re considering shortening your term
  • If you’re considering cash-out for home improvements or debt consolidation, paying off a second mortgage, etc.

Contact a VMG Mortgage Broker for a refinance quote if you believe you may benefit!

Article from Housing Wire about the adverse market fee below:

The Federal Housing Finance Agency (FHFA) is officially axing Freddie Mac and Fannie Mae’s controversial adverse market refinance fee.

Starting in August, lenders will no longer be required to pay the government sponsored enterprises (GSEs) a fee of 50 basis points when they deliver refinanced mortgages. 

FHFA Acting Director Sandra Thompson said the elimination of the fee will help families take advantage of the current low rate environment.

“Today’s action furthers FHFA’s priority of supporting affordable housing while simultaneously protecting the safety and soundness of the Enterprises,” said Thompson.

The elimination of the fee is one of a number of changes the mortgage industry has asked the federal regulatory agency to make. Pete Mills, senior vice president of residential policy at the Mortgage Banker’s Association, said the move was “very positive for borrowers” and “appreciated” by the mortgage industry.

“The forbearance exiting process has gone well, the rate of exits is accelerating and the job market is strong,” Mills said. “All of those things bely the notion that we’re still in an adverse market.”

FHFA began charging the adverse market fee on most refinanced mortgages last year, due to “increased costs and risk” to the agency as a result of Covid-19.

Critics of the policy, however, said that it was simply a way for the GSEs to increase their capital levels during last year’s historic refinance boom.

The GSEs have also performed well throughout the pandemic. In the first quarter of 2021, Fannie Mae reported $5 billion in net income, and Freddie Mac reported $2.8 billion in earnings

The elimination of the adverse market fee is one of the first decisive policy actions the agency has taken since a long-awaited Supreme Court decision allowed President Joe Biden to fire the FHFA’s director at-will. Within hours of the decision, Biden removed FHFA Director and Trump-appointee Mark Calabria, a libertarian economist, and installed Thompson to lead the agency.

In her first weeks directing the federal regulatory agency, Thompson has said expanding access to credit in communities of color is a top priority.

In June, FHFA also announced that its servicers must adhere to the Consumer Financial Protection Bureau’s additional procedural requirements governing the foreclosure process a full month before it takes effect.