A new rule is set to take effect that will raise the cost to refinance mortgages held by Freddie Mac and Fannie Mae.

If you were planning on refinancing your mortgage this year, you only have a few months left before it might cost you more money. A new rule called the adverse market fee is being implemented by Fannie Mae and Freddie Mac to cover the risk of loss due to the coronavirus pandemic. The rule was authorized by the Federal Housing Finance Agency (FHFA) and is set to go into effect on December 1, 2020. The new fee will be equal to 0.5 percent of the mortgage balance.

Adverse market fees are used when the government is concerned that a larger than average number of loans could go into default. During the great recession, Fannie Mae and Freddie Mac added a .25 percent fee on all mortgages purchased by the federal government. Mortgage forbearance programs and suspensions of all foreclosures during the coronavirus pandemic have put increased pressure on federal housing programs. The adverse market fee will help offset the costs associated with keeping Americans in their homes.


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With the average mortgage in the U.S. hovering around $300,000, the fee would tack on an additional $1,500 to the list of fees. No fee will be charged on balances that are less than $125,000. Initially the fee was supposed to go into effect on September 1, but outcry by mortgage lenders with loans in process persuaded the agencies to delay it. Mortgage companies can decide whether or not to pass it on to the consumer, but given the amount, most lenders will probably not be able to absorb the fee.

The FHFA says the fee will probably not prevent consumers from refinancing. With interest rates at historic lows, the money saved by refinancing could greatly outweigh the amount of an adverse market fee. 

Have you refinanced this year? Do you plan to refinance in the next couple of months? Tell us in the comments!