Refinance Before GSE Fees Go Into Effect

Back in August of this year, the Federal Housing Finance Agency (FHFA) decided to raise their GSE fees. Specifically, these fees are going to affect homeowners looking to refinance their mortgage. The FHFA is the agency that regulates Fannie Mae and Freddie Mac. The fee increase is scheduled to start this December.

GSE fees are fees that Fannie Mae and Freddie Mac charge as a sort of “security”. They're put in place just in case a borrower defaults on their loan. In fact, GSE fees are increasing in order to deal with the current adverse market. An adverse market is exactly like the recession we’re currently facing. Given the impact that the pandemic has had on the US economy, the FHFA is trying to maintain its liquidity and stability—and they’re doing it by raising fees. What kills me about these fees is that they’re going to cost homeowners an extra 0.5%. To give you some perspective, this is about $1640 and $1425 per refinance in Miami-Dade and Broward county, respectively. And guess what? They’re completely unnecessary.

GSE Fees Will Be Increased

Mark Calabria issued the proposal to raise GSE fees months ago—when he announced that the FHFA would be coming up with a plan to release Fannie Mae and Freddie Mac from government conservatorship. This is something the Trump administration has been pushing for some time now—but there was no need to rush it.

And now that Biden has been projected as the winner of the presidential elections, I believe that Mark Calabria was a little too trigger happy with the scheduling of these fees. That’s because under Biden, Fannie Mae and Freddie Mac won’t be leaving the government’s control. And yet, Calabria is still going to raise fees. It doesn’t make sense, and personally, I’m not a fan of someone taking advantage of my clients like that.

Mortgage Rates Are Still Low

Although there was another historically low mortgage interest rate last week (rates dropped to 2.78%), the increase in GSE fees means less savings for homeowners when they refinance. Because of the current state of the economy and the projected low rates, it’s expected that homeowners will still be able to save some money when they refinance—but for those already struggling, this fee increase might not make refinancing as worthwhile.

But I’m still optimistic. There are a lot of changes coming to the housing industry. While some ripple effects are going to be felt throughout the industry—we’ll be seeing an even stronger housing market than before.

If you’d like to strike while the iron’s hot and refinance, feel free to check out our refinance rate checker!