Refinance Fees Change: How This Affects Your Mortgage Business

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Refinance Fees

As a loan officer, you understand the importance of refinance fees and how these directly affect your clients and your business. 

Recently, Fannie Mae and Freddie Mac announced a new “adverse market fee.” 

Refinance Fees

What is the adverse market fee?

Fannie Mae and Freddie Mac said that they will begin charging a 0.5% “adverse market fee” on all refinances. So, this additional fee will apply to both cash-out and non-cash-out refis. The adverse market fee will impact refinance customers beginning on December 1 (updated as of 8/31/2020).

What do Fannie Mae and Freddie Mac do?

Fannie Mae and Freddie Mac are United States government-sponsored enterprises. They are not lenders themselves. Instead, they purchase loans from lenders. Then, they package them into mortgage-backed securities, and sell those securities to investors. Also, they provide guarantees to investors and advance payments.

The benefits of the adverse market fee

As you probably have heard, the reaction to this fee from many housing advocates, mortgage experts, and lending professionals has been negative. However, the fee was created in an effort for Fannie Mae and Freddie Mac to protect themselves from potential losses on their refinanced mortgages. 

This decision was in response to the COVID-19 pandemic and current low interest rates. The change, effective December 1, will apply to all refinances that aren’t already in process. 

That being said, these new refinance fees are intended to offset risks on refinance loans. Mortgage rates on refinance loans have dropped drastically since early January 2020. This new adverse market fee could be seen as minor compared to the considerable drop in mortgage rates. 

The downfalls of the adverse market fee

Mortgage loans with a balance of less than $125,000 will be exempt from the fee that goes into effect December 1. 

But, for the average consumer, this fee will raise monthly mortgage rates by $1,400  according to the Mortgage Bankers Association (MBA). Additionally, thousands of borrowers who did not lock in their rates before December 1 will face unanticipated cost increases. So, this change could occur just days before closing. 

Why should you help refinance customers understand this change?

Recently, refinances have peaked due to low mortgage rates. So, it’s important to educate your current and prospective clients. Then, they are aware of this new adverse market fee and how other refinance fees might affect them. 

For many homebuyers, understanding how mortgage rates and refinance fees will affect them can be a mystery. As their loan officer, it is your job to be a trusted advisor. Communicate with your database about changes within the industry to grow those relationships. 

Remember, you’re the expert here! You can educate and encourage your borrowers to find the perfect solution to meet their financial goals. Target customers who have already closed a loan with you and could potentially save money by refinancing their mortgage. 

How can you help support potential refinance customers? 

With this new adverse market fee announcement, you have the chance to focus your marketing efforts on a specific group of customers. So, be available to your customers and answer their questions promptly and accurately. 

Send a Thoughtful Gift

One ways to continue and delight customers even after they have their new home is through gifts and cards. There are many ways that you could approach this technique. Examples include sending holiday, loan anniversary, and birthday cards. Or, putting together small gift packages for certain past borrowers.

If you don’t have the time or resources to provide this service yourself, use a concierge program like Jungo’s. This will automate the process for you. With one click of a button in Jungo’s CRM, you can send branded cards and gifts straight to your past customer’s door. 

Provide Valuable Information

Looking for a more digital option for keeping up with your clients? Placing your past borrowers on a drip marketing email campaign is a great way to stay at the forefront of their minds. One of the best ways is to send them emails that provide value. For instance, you could send home DIY tips, or facts about the benefits of building your home’s equity. Not only will your customers love to learn more from you, they may even forward that email to interested friends and family.

Jungo’s automated marketing campaigns do the heavy lifting for you. With over 400 pre-written email templates, you can easily place customers on a variety of marketing campaigns. The “Keeping in Touch” campaign allows you to automatically send helpful emails to past customers.

Share Mortgage Refinance Tips on Social Media

On your professional social media accounts, focus a few of your upcoming posts on educating your followers about refinancing fees and the adverse market fee. They will appreciate learning the ins-and-outs of how much it costs to refinance. Also, you can share how to know if they’re a good candidate to refinance. There are many important factors to consider. 

Remember, when you provide education to your social media audience, you become a trusted advisor. People may have heard about new refinance fees. So, sharing what that really means for them will help you gain new clients.

Bottom Line

Fannie Mae and Freddie Mac’s new “adverse market fee” will affect refinance customers beginning on December 1. These industry changes may be the first of many in response to the COVID-19 pandemic. 

So, educate clients on this change to help support them as they consider a refinance. Be a trusted advisor and make your sales efforts even more powerful and effective!