With A Refinance Charge Looming, Clients May Be Motivated To Act NowOn August 12, much to the surprise – and disdain – of lawmakers and mortgage industry professionals, the Federal Housing Finance Agency (FHFA) announced that refinances purchased by Fannie Mae and Freddie Mac would include a new fee of 0.5% of the loan balance.
Known as the Adverse Market Refinance Fee, this surcharge was made in an effort to help Fannie and Freddie recover from at least $6 billion in losses from the pandemic and manage the high risk of lending in such uncertain times.
The fee was scheduled to take effect on September 1.
But just as fast as the FHFA released the news, it announced it would postpone the date back to December 1. The federal agency will also exempt loans that are less than $125,000.
The FHFA made the changes after receiving pushback from those in the mortgage industry who felt the timing was inappropriate since many Americans are struggling financially and the economy is just beginning its long recovery.
What Does This Mean For Your Business?With only a few weeks until the original September 1 date, you, like most lenders, most likely didn’t have time to warn clients. In fact, many clients who were already in process were all of a sudden hit with an unexpected charge.1
With the refinance surcharge delayed until December 1, you now have time to warn your clients and encourage them to refinance today. The ability to avoid an extra charge could be the perfect motivator. By being transparent and helping them save money, you could win over your client even more.
Less Than One Month To Lock Your Client’s Loan And Avoid The FeeSince the fee is for loans purchased by Fannie or Freddie and it takes time for loans to close, loans locked in October would generally be subject to this new fee. That means you can expect to see lenders introducing this fee at the beginning of October. That gives your clients this month (September) to decide to refinance and lock their loans.
As an example, a refinance loan of $300,000 would cost your client an extra $1,500. If they lock their loan before early October, they can avoid that fee altogether.
If you’re looking for more ways to motivate your clients to refinance now or trying to figure out how to talk to your clients about the Adverse Market Refinance Fee, set up a brainstorming session with your Account Executive today. They’re always here to help.
As always, as more details develop, we’ll be sure to keep you updated.
1In a recent email to our partners, we pledged to do the right thing and apply a credit or provide a refund for all agency refi locks between 8/13 and 8/25.