Industry Reaction: FHFA Postpones GSE Refinance Fee

The Federal Housing Finance Agency (FHFA) today directed GSEs Fannie Mae and Freddie Mac to delay the implementation date of their Adverse Market Refinance Fee until December 1. The fee initially was scheduled to take effect September 1.

FHFA also announced the GSEs will exempt refinance loans with loan balances below $125,000, nearly half of which are made up of lower income borrowers (at or below 80% of area median income).

Affordable refinance products, Home Ready and Home Possible, are also exempt.

The FHFA said in a statement that the fee is necessary to cover projected COVID-19 losses of at least $6 billion at Fannie and Freddie. Specifically, the actions taken by the GSEs during the pandemic to protect renters and borrowers are conservatively projected to cost them "at least $6 billion and could be higher depending on the path of the economic recovery."

Initially, some members of the mortgage and banking industry spoke out against the 0.5% refinancing fee.

Bankrate.com Chief Financial Analyst, Greg McBride, CFA has been one of the first experts to comment on the postponement and exemptions, saying that while "not as good as repealing it altogether," the decision to postpone implementation and exempt loan amounts under $125,000 is "certainly better" than the original conditions.

Independent Community Bankers of America (ICBA) President and CEO Rebeca Romero Rainey also issued a statement on the announcement:

"ICBA welcomes today's announcement by the FHFA, Fannie Mae and Freddie Mac regarding the Adverse Market Fee on refinance loans delivered to the government-sponsored enterprises. Extending the effective date of this fee gives borrowers and lenders time to close and fund those loans that are currently in process. Further, exempting [certain] loan amounts ... will help keep those loans affordable. ICBA appreciates the FHFA’s willingness to work with all stakeholders on this issue and looks forward to continuing to work with the agency and GSEs to support the U.S. economic recovery."

Updated, August 26: NHC President and CEO David M. Dworkin added that he welcomed the decision by the FHFA.

“NHC applauds FHFA’s decision to delay the effective date of the new refinance fee to December 1. We look forward to working with FHFA and the GSEs to avoid any increase in the cost of refinancing for homeowners,” said Dworkin.

“Fannie Mae and Freddie Mac play a critical role in preserving liquidity and safely serving mortgage consumers, especially important during this pandemic. We appreciate the decision to delay this policy change, which will allow more households to take advantage of historically low interest rates to reduce their monthly payment. It’s never been more important for homeowners to reap the financial benefits and savings of low interest rates. Now is the time to encourage refinancing – not make it harder.”