FHFA Delays Refi Fee Implementation to Dec. 1
The Federal Housing Finance Agency this week announced Fannie Mae and Freddie Mac would delay implementation of a controversial Adverse Market Refinance Fee by two months, to Dec. 1.
The fee, announced earlier this month (https://newslink.mba.org/mba-newslinks/2020/august/mba-objects-to-gse-adverse-market-refinance-fee/), was previously scheduled to go into effect Sept. 1.
FHFA also announced Fannie Mae and Freddie Mac will exempt refinance loans with loan balances below $125,000, nearly half consisting of lower income borrowers at or below 80% of area median income. Affordable refinance products, Home Ready and Home Possible, are also exempt.
The Mortgage Bankers Association welcomed the announcement. MBA President and CEO Robert Broeksmit, CMB, issued the following statement:
“We welcome today’s announcement from the FHFA amending the recently announced Adverse Market Refinance Fee from Fannie Mae and Freddie Mac. Extending the effective date will permit lenders to close refinance loans that are in their pipelines and honor the rate lock commitments they made to their borrowers, ensuring that economic relief in the form of record low interest rates will continue to flow to consumers.
“We understand that the pandemic and the associated borrower assistance measures the GSEs have instituted impose significant costs on the GSEs and on mortgage servicers, and we are gratified that the revised guidelines also reflect the need to lessen the impact on borrowers with modest incomes or low loan amounts. Likewise, we support the previously announced exemption of all home purchase loans.
“We look forward to ongoing collaboration with the FHFA, the GSEs and other stakeholders to ensure that future policy and pricing decisions strike the right balance between allowing the GSEs to appropriately manage their risk and continuing to offer affordable and sustainable home purchase and refinance opportunities to all qualified borrowers.”
The Adverse Market Refinance Fee announcement this month drew strong objections from MBA, industry trade groups, consumer groups and members of Congress. Last week, MBA’s grassroots advocacy arm, the MBA Mortgage Action Alliance, issued a Call to Action (https://newslink.mba.org/mba-newslinks/2020/august/mba-mortgage-action-alliance-call-to-action-targets-gse-refi-fee/) in which its members generated thousands of calls and emails to members of Congress, raising objections to the fee.
FHFA and the GSEs defended the fee, saying it was necessary to cover projected COVID-19 losses of at least $6 billion at Fannie Mae and Freddie Mac. “Specifically, the actions taken by the Enterprises during the pandemic to protect renters and borrowers are conservatively projected to cost the Enterprises at least $6 billion and could be higher depending on the path of the economic recovery,” FHFA said.
FHFA said those expenses are expected to at least include:
• $4 billion in loan losses due to projected forbearance defaults;
• $1 billion in foreclosure moratorium losses; and
• $1 billion in servicer compensation and other forbearance expenses. “FHFA has a statutory responsibility to ensure safety and soundness at the Enterprises through prudential regulation,” FHFA said. “The Enterprises’ Congressional Charters require expenses to be recovered via income, allowing the Enterprises to continue helping those most in need during the pandemic.”