FHFA eliminates COVID-related fee for Fannie, Freddie loans

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Both Fannie Mae and Freddie Mac will eliminate the Adverse Market Refinance Fee for loan deliveries effective Aug. 1, according to the Federal Housing Finance Agency (FHFA).

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This means that the lenders will no longer be required to pay Fannie and Freddie a 50-basis point fee when they deliver refinanced mortgages. The fee was designed to cover losses projected due to the COVID-19 pandemic, but the COVID-19 policies proved to be effective enough to warrant an early conclusion of the Adverse Market Refinance Fee.

FHFA expects those lenders who were charging borrowers the fee will pass the cost savings back 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 FHFA Director Sandra Thompson said. “Today’s action furthers FHFA’s priority of supporting affordable housing while simultaneously protecting the safety and soundness of the Enterprises.”

The FHFA reports that the vast majority of Fannie and Freddie borrowers have successfully exited COVID-19 forbearance. As of April, only two percent of single-family mortgages guaranteed by the enterprises remained in forbearance, down from about five percent in May of 2020.

The move was embraced by leading banking organizations, including the Independent Community Bankers of America (ICBA).

“ICBA welcomes today’s Federal Housing Finance Agency announcement that it will eliminate the Adverse Market Refinance Fee on refinance loans delivered to Fannie Mae and Freddie Mac,” ICBA President and CEO Rebeca Romero Rainey said. “ICBA opposed the 50-basis-point price increase on most refinance mortgages purchased by the government-sponsored enterprises because it increased the cost of mortgage credit in the middle of the pandemic-induced economic downturn.”

The Mortgage Bankers Association (MBA) also supports the elimination of the fee.

“MBA applauds Acting Director Sandra Thompson’s decision to eliminate the Adverse Market Refinance Fee. We have called on FHFA to rescind this policy and appreciate that they have reviewed the data and been responsive to our request. 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,” MBA President and CEO Bob Broeksmit said. “We look forward to continuing to work with FHFA, and other stakeholders, including Congress, on ways to continue to protect homeowners and taxpayers while ensuring a liquid, well-regulated mortgage market.”

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