The “modest” fee increase on the refinancing of mortgages will help Freddie Mac and Fannie Mae continue to weather the coronavirus economic crisis, while still helping homeowners who need the help the most, Freddie Mac and Fannie Mae officials said this week.
“The fact is we have put in place many policies for mortgages backed by our companies that have provided critical support to homeowners and renters during COVID-19,” Freddie Mac CEO David Brickman and Fannie Mae CEO Hugh Frater said in a statement Wednesday. “Fannie Mae and Freddie Mac are willingly absorbing the cost of these activities.”
They added, “While the re-financing market remains strong, there will be delinquencies and defaults that hit companies because of COVID-19. This modest fee will help us continue helping those who are really hurting during the pandemic.”
The Federal Housing Finance Agency last week announced that the two Government Sponsored Enterprises will start imposing a 0.5% increase for homeowners seeking to refinance their mortgages.
The announcement drew bipartisan condemnation on Capitol Hill and opposition from credit union trade groups and consumer advocates. They estimated that the fee increase will cost homeowners an additional $1,400 if they choose to refinance.
That figure is a “misrepresentation” of how the fee would operate the two CEOs said. For an average refinanced mortgage, it would cost an additional fee of about $15 a month they said. The two CEOs said that for an average refinanced mortgage, a homeowner would have saved $133 in their monthly payment. With the added fee, the homeowner will save $118 a month.
The CEOs said that record low mortgage rates have spurred a surge in homeowners refinancing their mortgages, leading to large profit margins for some mortgage lenders. As a result, some lenders might absorb the fee themselves.
In addition, they noted, the fees will not impact homeowners who are not choosing to refinance their mortgages.
Lawmakers on both sides of the Capitol have condemned Freddie Mac and Fannie Mae for imposing the new fee.
“The Enterprises’ charters state that one of their core purposes is to provide stability in the secondary mortgage market,” 15 Democratic senators, including Senate Banking ranking Democrat Sherrod Brown of Ohio said in a letter to FHFA Director Mark Calabria. “We are concerned that this sudden change of the rules that will shift more of the financial burden to consumers could contradict that purpose.”
The senators went on to urge Calabria and the Government Sponsored Enterprises not to adopt any policy or pricing changes that will hurt homeowners as they attempt to weather the pandemic.