By G. Steven Bray
Wednesday evening, the Federal Housing Finance Agency (FHFA), the regulator for Fannie Mae and Freddie Mac, announced a tax to be charged on every refinance loan it purchases beginning Sep 1st. The “tax” is a fee equal to 0.5% of the loan amount. So, a $300k loan will incur a $1500 fee.
Given that it generally takes a few weeks for Fannie and Freddie to purchase loans from lenders, this means that starting immediately, refinancing your mortgage just got more expensive.
FHFA calls the fee an “adverse market fee” due to the risk and economic uncertainty caused by the Wuhan virus. That explanation might be more believable had FHFA also applied the fee to purchase loans. Refinance loans are less risky than purchase loans because they usually reduce a homeowner’s housing payment.
Instead, it looks more like a money grab. It’s certain that FHFA knows that right now wholesale lenders have fat margins on refinance loans because mortgage rates have not kept pace with the rest of the bond market. Based on the way this fee was imposed, it seems FHFA thinks it needs a “piece of the action.”
Like most misguided government policies, this probably was the brainchild of some bureaucrats who are clueless how the mortgage marketplace really works. They probably thought consumers would be insulated from the fee, that they’d just be fleecing lenders. Instead, refinance rates Thursday morning were about a quarter point higher.
It’s really disappointing that in a time of national crisis, when refinancing to get a lower housing payment might help so many families survive, that these supercilious people thought the best course of action was yet another tax.
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