Photo courtesy of Fannie Mae

The Federal Housing Finance Agency is offering a weekend present to loan originators looking for refinance business and homeowners looking to refinance this summer by announcing the end to its Adverse Market Fee.

The move, which the FHFA said in a statement was intended to “help families reduce their housing costs,” takes effect Aug. 1.

Fannie Mae and Freddie Mac started charging a 0.5 percent fee on all refinance mortgages, with a small carve-out for some single-family construction-to-permanent loans, last year. The logic, it said at the time, was due to increased risk of defaults caused by COVID-19’s economic side-effects. The fee was intended to cover any losses related to the pandemic, but mortgage industry groups protested the policy loudly, calling it an “ill-timed, misguided directive.”

“The pricing increase is particularly harmful for our nation’s low- and moderate-income homeowners and for the emerging, but unsteady improvements to the national economy,” a coalition of consumer and lending groups said in a joint letter when the policy was first announced.

Now, with the number and share of residential mortgages in forbearance shrinking dramatically, Fannie and Freddie’s overseer said the time has come to end the policy. Around 2 percent of GSE-guaranteed loans were in forbearance as of the end of April, down from a high of 5 percent in 2020.

“The COVID-19 pandemic financially exacerbated America’s affordable housing crisis. Eliminating the Adverse Market Refinance Fee will help families take advantage of the low-rate environment to save more money,” FHFA Acting Director Sandra L. Thompson said in a statement. “Today’s action furthers FHFA’s priority of supporting affordable housing while simultaneously protecting the safety and soundness of [Fannie and Freddie].”

The move could help lenders attract more refinance customers while mortgage interest rates continue to hover at historic lows.