Faced with a barrage of criticism, the Federal Housing Finance Agency announced Tuesday that it is delaying the implementation date of the “adverse market refinance fee” for three months.
The fee – which drew criticism from members of Congress, industry groups and housing advocates – was scheduled to take effect next week. It is now going to take effect Dec. 1, FHFA announced
FHFA also said the fee will not apply to refinances on loans below $125,000.
“We welcome today’s announcement from the FHFA amending the recently announced Adverse Market Refinance Fee from Fannie Mae and Freddie Mac,” Mortgage Bankers Association President and CEO Bob Broeksmit said. “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.”
The fee is designed to protect Fannie and Freddie from risk associated with the pandemic. It charges 0.5 percent of the loan amount to the borrower, or nearly $1,500 on the typical mortgage in the United States.
On Tuesday, FHFA said the fee is necessary to cover projected COVID-19 losses of at least $6 billion at Fannie Mae and Freddie Mac.
“Specifically, the actions taken by the Enterprises during the pandemic to protect renters and borrowers are conservatively projected to cost the Enterprises at least $6 billion and could be higher depending on the path of the economic recovery,” FHFA said in a statement.
The American Bankers Association, Mortgage Bankers Association, National Association of Realtors and 17 other organizations had previously called the fee an “ill-timed, misguided” surprise, but MBA used a more conciliatory tone Tuesday.
“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,” Broeksmit said. “Likewise, we support the previously announced exemption of all home purchase loans.”