Many homeowners are taking advantage of mortgage rates that are currently at all-time lows and refinancing their home loan to an even lower interest rate. That is bringing about a new fee that lenders will be adding when a conventional loan is refinanced, as of Oct. 1, 2020.

Throughout 2019 and into the 1st quarter of 2020, mortgage rates were at already very low rates, so many, many homeowners took advantage of that, and either bought a new home or refinanced their loan into those low rates.

But beginning in April 2020, rates went down even more, setting record lows –and the borrowers who had already refinanced or purchased wanted to refinance again. With those refinances happening so close together, Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corporation), both organizations that buy mortgages from the banks, are losing billions of dollars since those loans have not have a chance to mature.

Because Fannie Mae and Freddie Mac are taking those losses, they will begin implementing a .5% “adverse market” fee to borrowers refinancing conventional mortgages. This is not a .5% rate hike but adds a .5% fee charged on the loan. For example, on a $200,000 mortgage, the new fee will add $1,000 to the closing costs. Lenders are not absorbing this fee so it will be rolled directly into the consumer’s closing costs. It is considered a surcharge on refinances.

A key note: this fee only affects conventional refinances, not purchases, and it does not apply to VA or FHA loans. Borrowers will see this fee appear starting on October 1, 2020.