Fannie Mae and Freddie Mac are dropping a fee on mortgage refinances that was instituted during the pandemic, lowering costs for borrowers, the Federal Housing Finance Agency said Friday.

Fannie and Freddie were charging lenders a 50 basis-point fee for all loans that were delivered to the two mortgage giants. The fee, designed to cover losses projected as a result of the pandemic, was being passed on to borrowers.

“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,” acting Federal Housing Finance Agency Director Sandra Thompson said in a statement. Her agency is Fannie and Freddie’s conservator.

“Today’s action furthers FHFA’s priority of supporting affordable housing while simultaneously protecting the safety and soundness of the Enterprises.”

The mortgage industry applauded the move.

“Santa Claus has come early for homeowners looking to refinance their mortgages,” said Greg McBride, chief financial analyst for Bankrate.com. “The fee had often resulted in an increase of one-eighth percentage point in rate, which was enough to siphon $20 per month in potential savings out of the pockets of borrowers with a $300,000 loan.”

The fee was put in place just as the federal government instituted a massive mortgage bailout program at the start of the pandemic. At the worst of the economic shutdown, roughly 5% of Fannie and Freddie borrowers were in mortgage forbearance programs. As of July 13, that share had fallen to 2.1%, according to Black Knight.

In total, 1.86 million borrowers remain in Covid forbearance plans, making up 3.5% of all active mortgages. For FHA/VA, the share is 6.2% and for private label and bank portfolio loans the share is 4.0%

Mortgage rates recently dropped and are now sitting near a five-month low. Applications to refinance jumped in the last two weeks, according to the Mortgage Bankers Association, and will likely move even higher with this additional savings.

“We have called on FHFA to rescind this policy and appreciate that they have reviewed the data and been responsive to our request,” said Bob Broeksmit, the association’s president and CEO. “With less than 2 percent of GSE loans in forbearance and continued home price appreciation resulting in significant borrower equity, there is no need for the fee.”