(Bloomberg) – Fannie Mae and Freddie Mac are planning to pay an additional fee for most mortgage refinancing loans that can increase costs for borrowers trying to take advantage of historically low rates in an uncertain economy.
Mortgage giants, who have been under government control since 2008, announced the plan late Wednesday, saying the new 0.5% tariff is intended to reduce their risk in light of the Covid-19 pandemic. It would apply to most refineries involving companies.
The companies and their regulator, the Federal Housing Finance Agency, have been cautiously violating during the pandemic, as parts of the mortgage market were temporarily seized in March before slowly recovering. FHFA Director Mark Calabria, appointed by President Donald Trump, is trying to end US control over companies, a task that has been hampered by the pandemic and that has come from the economic downturn.
Fannie and Freddie do not give credit. They buy them from lenders, wrap them in securities and guarantee repayment of principal and interest to investors. The companies said the new fee would apply to loans they bought starting next month, meaning borrowers could see new costs almost immediately. Lenders can absorb some of the costs themselves rather than pass them on to consumers.
An FHFA spokeswoman said Fannie and Freddie requested the changes based on their projected losses in connection with the pandemic.
The Mortgage Banking Association, a trading group for lenders, said the fee would increase costs for the typical borrower by $ 1,400. MBA President Bob Broeksmit said in a statement that the announcement “flies in the face of recent administration executive action, urging federal agencies to take all measures within their own authorities to support homeowners in distress.”
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