Mortgage Refinancing Sees a Boost After FHFA Fee Repeal

Mortgage refinancing exploded in July, according to mortgage data analyst Black Knight. 

The report shows rate lock volume, the number of borrowers who locked in their mortgage rate, jumped by 5.5% in July. Rate/term refinance grew 24% month-over-month, while cash-out refinance grew 20%.

The Federal Housing Finance Agency (FHFA) decided in mid-July to remove the adverse market refinance fee put in place in 2020. The 0.5% fee was intended to alleviate any future financial burden placed on Fannie Mae and Freddie Mac by the effects of the pandemic. Instead of a downturn, the housing market soared. The boom in refinancing is directly linked to the FHFA’s decision to reverse course. And now “[r]efinance volumes were undoubtedly boosted” by its repeal, Black Knight reports.

Scott Happ, Black Knight’s secondary marketing technologies president, also pointed to the delta variant as a reason, saying it has pushed the yield on the 10-year Treasury down. “This has, in turn, put downward pressure on mortgage interest rates, with our OBMMI daily interest rate tracker showing July’s month-end conforming 30-year at 2.99%, 17 basis points lower than the month prior.”

Dropping the fee can save the average mortgage borrower $1,400 when refinancing, according to an MBA statement. The MBA criticized the fee when it was imposed as a “misguided directive.” Fannie and Freddie collected an estimated $5.9 billion from the fee, though no serious market downturn materialized.

Ending the adverse market fee created some controversy of its own when Universal Wholesale Mortgage’s Mat Ishbia announced his company’s complicated system for customers to reclaim the fee from loans to which it no longer applied.

While the other major players in the mortgage market immediately dropped the fee from loans in their lending pipeline, including “locked” loans, Ishbia took a different approach. He required mortgage brokers to send an email requesting the fee be paid back to the borrowers, rather than simply not collecting it.