FHFA Postpones Implementation Of Contentious Mortgage Refinance Fee By Three Months

After much criticism, ​ the Federal Housing Finance Agency, or FHFA, has delayed implementation of its new adverse market refinance fee until Dec. 1 from Sept. 1.

FHFA, the regulator of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corp. (Freddie Mac), had previously unveiled a new 0.5% refinance mortgage fee.

FHFA also said that Fannie and Freddie will exempt refinance loans with loan balances below $125,000.

The agency reiterated that the fee is still necessary to “cover projected COVID-19 losses of at least $6 billion at Fannie and Freddie” – depending on the path of the economic recovery.

Such expenses, FHFA noted, 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 further said that throughout the pandemic in order to protect borrowers and renters it allowed Fannie and Freddie to offer forbearance on multifamily and single-family mortgages; buy loans in forbearance; modify mortgage terms to reduce monthly payments and simplify repayment options; provide protections for tenants in properties in forbearance; and provide loan processing flexibility.

Greg McBride, chief financial analyst at Bankrate.com, welcomed the postponement, to a degree.

“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,” he said.

The Mortgage Bankers Association, or MBA, also welcomed the postponement.

"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,” MBA President and CEO Bob Broeksmit said.

"We understand that the pandemic and the associated borrower assistance measures [Fannie and Freddie] have instituted impose significant costs on [Fannie and Freddie] 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," he continued. "Likewise, we support the previously announced exemption of all home purchase loans.“

Broeksmit added: "We look forward to ongoing collaboration with the FHFA, [Fannie and Freddie], and other stakeholders to ensure that future policy and pricing decisions strike the right balance between allowing [Fannie and Freddie] to appropriately manage their risk and continuing to offer affordable and sustainable home purchase and refinance opportunities to all qualified borrowers."

The American Bankers Association stated that the FHFA’s decision is an “important step in the right direction that will help lower-income borrowers in particular. We will continue to urge FHFA to carefully assess whether this fee, even delayed until December, could unnecessarily harm struggling homeowners and the broader economy."