The refinance fee imposed last year added about $20 a month for a $300,000 loan, said one analyst.
Photo: MARK LIPCZYNSKI for The Wall Street Journal
WASHINGTON—The cost of refinancing government-backed home loans is likely to fall as mortgage giants Fannie Mae and Freddie Mac are set to drop a fee imposed last year in the midst of the Covid-19 pandemic.
A federal housing regulator said Friday that Fannie and Freddie will eliminate the 0.5% fee on mortgage refinancing starting Aug. 1. The fee, imposed last December, added about $1,400 to the cost of refinancing an average mortgage backed by the firms, according to an estimate from the Mortgage Bankers Association.
“The Covid-19 pandemic financially exacerbated America’s affordable housing crisis,” Federal Housing Finance Agency Acting Director Sandra L. Thompson said. “Eliminating the [fee] will help families take advantage of the low-rate environment to save more money.”
Greg McBride, chief financial analyst at personal-finance firm Bankrate.com, said the fee added about one-eighth of a percentage point to the average mortgage rate, or about $20 a month for a $300,000 loan. How much of that makes it back into consumers’ pockets will likely depend on how much home buyers shop around among different lenders, he added.
Fannie and Freddie encourage low borrowing costs by purchasing many mortgages from lenders and subsequently guaranteeing them. The fee was intended to cover potential losses related to the pandemic and government measures to soften its economic impact, including a program that allowed some borrowers to suspend monthly payments.
The fee prompted criticism from mortgage lenders and a bipartisan group of lawmakers. “Repealing this ill-conceived and misappropriated fee is a win for borrowers and lenders alike,” Mr. McBride said.
Write to Paul Kiernan at [email protected]
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