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Financial Services Law Insights and Observations

Fannie and Freddie announce new refinance fee

Federal Issues Fannie Mae Freddie Mac GSE Refinance Mortgages Covid-19

Federal Issues

On August 12, Fannie Mae and Freddie Mac announced a new adverse market refinance fee of 50 basis points, or 0.5 percent, on certain refinance mortgages. According to Freddie Mac’s Guide Bulletin 2020-32, the refinance fee applies to cash-out and no cash-out refinance mortgages “except for Construction Conversion Mortgages that qualify for single-closing Interim Construction Financing and Permanent Financing.” The Bulletin notes that the fee is a result of economic and market uncertainty due to the Covid-19 pandemic. Fannie Mae’s Lender Letter LL-2020-12 notes that the new fee applies to limited cash-out refinances and cash-out refinances but provides a limited exception for certain single-closing construction-to-permanent loans.

The new fee is effective for applicable refinance mortgages with settlement dates on or after September 1.

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