With refinancing rates being reported near 2.5%, current homeowners have been quick to take advantage… So much so, that the two large government-sponsored enterprises who back mortgage products have announced that they will be tacking on an additional one-time 0.5% Adverse Market Refinancing Fee to the lender, who will undoubtedly pass it on to consumers. To be clear, the Adverse Market Fee is a one-time 0.5% *fee* for Fannie Mae and Freddie Mac backed refinancing loans and does not affect a loan’s rate. Rates have gone up due to the announcement, but it is important to distinguish that this is a one-time fee and not a rate increase to be expected.
Consumer protection groups as well as the mortgage industry are lobbying against the fee, but it is still moving forward and is going to take effect on December 1, 2020. In order to avoid the 0.5% Adverse Market Fee, consumers must close on their loans before November 30. If you close after November 30, you should expect to pay an additional 0.5% fee.
If you are currently in the process of refinancing with a close date beyond November 30, 2020, and you haven’t yet communicated with your lender regarding the fee, you should speak with your lender to decide if refinancing still makes financial sense for you with the additional fee.