Refinancing just got more expensive

 Regulations, Residential Mortgage  Comments Off on Refinancing just got more expensive
Aug 172020

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.

Fannie/Freddie to charge more for high credit scores

 Residential Mortgage  Comments Off on Fannie/Freddie to charge more for high credit scores
Apr 232015

For more information, please contact me at (512) 261-1542 or

By G. Steven Bray

Fannie Mae and Freddie Mac charge fees when you get a mortgage based on the loan characteristics, such as your credit score and the size of your down payment. You usually don’t see these fees because they’re built into your interest rate. However, in some cases, the fees can push up your rate as much as half a point.

Fannie and Freddie’s regulator is directing them to change these fees. For all borrowers, gone is the “adverse market” fee instituted to recapitalize Fannie and Freddie after the financial crisis. For a $200k loan, that will save you $500. They’re increasing fees slightly for rental property and cash-out loans based on the higher perceived risk. They also are increasing the fee for borrowers who use a second-lien to avoid mortgage insurance for the same reason. The changes add $250 and $750, respectively, for a $200k loan.

The higher fees may make sense for these loans because they are considered risker. What doesn’t make sense is the fee increase for borrowers with high credit scores or who make larger down payments. The regulator also failed to preserve the adverse market fee for East Coast states that have ridiculously high foreclosure costs as it had previously indicated it would do. Both of these changes make me wonder whether politics hasn’t trumped economics as both seem disassociated from market realities.

The changes take effect Sep 1st.