In a surprise move Wednesday night, Fannie Mae and Freddie Mac announced that they will impose an “adverse market refinance fee” of 50 basis points for no cash-out and cash-out refinance mortgages with delivery dates on or after Sept. 1, 2020 (for Fannie Mae loans) or with settlement dates on or after September 1 (for Freddie Mac loans). This fee—which would amount to an additional $1,400 for the typical consumer, based on the average GSE loan size—would either be paid up front or be added to the mortgage interest rate.
The American Bankers Association joined several other financial services, housing and consumer groups in a joint statement Thursday strongly criticizing this action by the GSEs and calling for the withdrawal of the fee. “The additional 0.5% fee on Fannie Mae and Freddie Mac refinance mortgages will raise costs for families trying to make ends meet in these challenging times,” the groups said. “The pricing increase is particularly harmful for our nation’s low- and moderate-income homeowners and for the emerging, but unsteady improvements to the national economy.”
ABA President and CEO Rob Nichols also raised these concerns in a strongly worded letter to FHFA Director Mark Calabria. Calling the GSEs’ action “bad public policy,” Nichols urged Calabria to intervene and rescind the proposed fee. “Adding this fee and making it effective in less than three weeks’ time will throw the current refinance market into disarray,” he wrote. “Borrowers who have a refinance in process but who have not locked in their rate will suddenly be faced with new costs, perhaps threatening their ability to move forward. Longer term, the fee puts downward pressure on the entire refinance market, threatening economic recovery.”
He added that “while other federal entities are doing their utmost to keep rates low and ABA members are working diligently to help borrowers into more affordable options, the Enterprises and the FHFA should not be taking actions that stymie those efforts.”
