Refinancing & The Adverse Market Fee | The Zebra Blog

Refinancing & The Adverse Market Fee

There was BIG NEWS today in the mortgage world. Freddie Mac and Fannie Mae announced that they were granted permission from the Federal Housing and Finance agency to charge an “ADVERSE MARKET FEE” of .50% on all refinance loans. This fee which the lenders are saying is to address risk management because of the current Covid market is not getting good feedback and many lenders are upset about it. The bottom line is that it will be more expensive to refinance your home. Whether you are doing a cash-out refinance or a regular refinance, it will cost you more to do so.

This take effect September 1st, but the problem for many people is timing. As of June, it was taking an average of 48 to 50 days to close a refinance loan. Now imagine, if a homeowner has not locked in their refinancing interest rate or if they were just thinking about refinancing there is no way to get a refinance loan closed in time to beat this deadline. If a homeowner is in the middle of the refinancing process and their lender has not locked in their rate and can prior to September 1st then they will get hit by this too.

As a real estate professional, you are going to get calls from clients asking if they should sell now because they do not want to refinance now. That may be the only silver lining in this big cloud because many markets need inventory. Many homeowners who were on the fence about refinancing may now sell. Maybe they were waiting to see if rates got any lower or perhaps, they were waiting to refinance after their last summer getaway. Well, if they apply right now for a refinance loan of any kind, they will get the half a percent “ADVERSE MARKET FEE”.

This announcement is not getting good reviews. The Mortgage Bankers Association is not happy. They are saying that if this was indeed strictly implemented due to an adverse market condition, why isn’t it being attached to purchases as well? It only applies to refinance loans and many people are unhappy about it to say the least.

This is a big deal. You are probably going to get emails, calls, and text messages about it. Be aware how this changes things for your clients. This is going to slow down the refinancing process and it is going to make homeowners rethink their refinancing plans.

So if we review the numbers this will mean that a $300,000 refinancing loan with a 20% down payment on a 30-year product will add another $1100 in Adverse Market Fees. That number will increase as the loan gets larger.

This feels like a money-grab, and I am not thrilled about it. I would rather they be up-front about it. If they want to increase rates because there is more risk in writing loans, do not call it an “Adverse Market Fee” when it is not being applied to purchase loans just refinance loans.

So, that is the big news today from Fannie and Freddie.

Until next week, take care!


By Denise Lones CSP, M.I.R.M., CDEI – The founding partner of The Lones Group, Denise Lones, brings nearly three decades of experience in the real estate industry. With agent/broker coaching, expertise in branding, lead generation, strategic marketing, business analysis, new home project planning, product development, Denise is nationally recognized as the source for all things real estate. With a passion for improvement, Denise has helped thousands of real estate agents, brokers, and managers build their business to unprecedented levels of success, while helping them maintain balance and quality of life.

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