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Earlier this month, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac would be imposing a new 0.5 percent adverse-market fee on mortgage refinances starting Sept. 1. Now the FHFA is ordering the enterprises to delay the implementation date of the fee until Dec. 1, 2020.

FHFA also announced the enterprises will exempt refinance loans with loan balances below $125,000—nearly half of which are composed of lower-income borrowers at or below 80 percent of area median income. Also exempt are affordable refinance products, Home Ready and Home Possible.

FHFA says the fee is “necessary to cover projected COVID-19 losses of at least $6 billion at the enterprises.”

Those expenses are expected to at least include:
– $4 billion in loan losses due to projected forbearance defaults
– $1 billion in foreclosure moratorium losses
– $1 billion in servicer compensation and other forbearance expenses

Throughout the pandemic, FHFA provided the following services through Fannie Mae and Freddie Mac:

– Forbearance on multifamily and single-family mortgages
– Purchasing loans in forbearance
– Modified mortgage terms to reduce monthly payments and simplify repayment options
– Protections for tenants in properties in forbearance
– Loan processing flexibility

Here’s how the industry is responding to the latest news:

“The Federal Housing Finance Agency has decided to postpone implementation of the much-criticized Adverse Market Refinance Fee until Dec.1, and exempted refinances for loan amounts under $125,000. While not as good as repealing it altogether, this is certainly better than the caper they pulled when they initially announced it without any advance notice.” — Greg McBride, Chief Financial Analyst, Bankrate.com

“While delaying the implementation of this fee may be helpful to lenders, it does nothing to mitigate the damage and cost it will have on consumers because lenders have already baked the fee into higher interest rates. C.A.R. is concerned that because lenders have already begun passing this punitive fee onto consumers, it will hinder the ability of California families to take advantage of the historically low interest rates. Moreover, the fee is counter to other actions taken by the government to ease the financial burden on Americans struggling during this pandemic because it is taking money right out of the pockets of homeowners when they can least afford it.” — C.A.R. President Jeanne Radsick.

“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.” — Bob Broeksmit, President & CEO, Mortgage Bankers Association

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