The new Biden administration policy is known as the Adverse Market Refinance Fee or the "FMERR fee". It requires Fannie Mae and Freddie Mac, the two government-sponsored mortgage giants, to charge lenders a 0.5% fee on all refinance loans they purchase beginning in December 2020. The aim of this policy is to offset the projected $6 billion in losses that Fannie Mae and Freddie Mac may face due to the COVID-19 pandemic.

This policy means that the cost of refinancing mortgages will increase for borrowers, especially those with good credit scores, as they will have to pay the fee passed down by lenders. This fee will increase the cost of borrowing for all borrowers, regardless of their credit scores or risk level. This will affect the affordability of homes for potential homebuyers, especially in Utah, where home prices are already increasing.

Utah has been experiencing a boom in real estate in recent years, with a steady increase in home prices, especially in the larger cities like Salt Lake City and Provo. According to Zillow, the median home value in Utah is around $400,000, and it is expected to increase by 8.2% in the next year. This trend suggests that the new policy will further increase the cost of buying a home in Utah, making it more difficult for potential homebuyers to enter the market.

One of the significant impacts of the policy is that it will disproportionately affect low-risk borrowers, who are generally better able to refinance their mortgages and take advantage of lower interest rates. Low-risk borrowers with good credit scores may choose not to refinance their mortgages due to the increased cost, which may result in them paying higher interest rates and monthly payments. This may lead to potential homebuyers being priced out of the market, as they may no longer be able to afford the monthly mortgage payments.

In addition to increased costs, the policy may also lead to a reduction in the availability of mortgages in Utah. Lenders may choose to reduce their lending activity in Utah or choose to lend only to higher-risk borrowers who can help offset the costs of the FMERR fee. This may result in a tightening of credit standards, making it harder for potential homebuyers to obtain a mortgage, especially for those with lower credit scores or who have limited funds for a down payment.

Moreover, the new policy may affect Utah's real estate market by reducing the overall demand for homes. Potential homebuyers may choose to hold off on purchasing a home due to the increased costs and limited availability of credit, resulting in a decline in home sales. This may lead to a slowdown in the real estate market, potentially reducing the value of homes in Utah.

In conclusion, the new Biden administration policy, the Adverse Market Refinance Fee or the "FMERR fee," is likely to have a significant impact on the Utah real estate market. The increased cost of refinancing mortgages and the potential reduction in the availability of mortgages may result in a reduction in demand for homes, leading to a slowdown in the market. Moreover, the increased cost of borrowing may make it more difficult for potential homebuyers to enter the market, especially those with low credit scores or limited funds for a down payment. Ultimately, the effects of this policy will depend on how lenders react and how the market responds to the increased costs of borrowing.

If you have questions about the Utah Real Estate market, please feel free to get in touch! 

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