**UPDATE** – After an outcry from various industry organizations, associations, lenders and the general public, the FHFA has made some adjustments to the Adverse Market Fee as originally planned. The fee will now go into effect on December 1, 2020 and impact loans above $125,000. The Home Ready and Home Possible loan products will also be exempt from this fee.
The Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac, announced they will impose an Adverse Market Fee of 0.5% for both cash-out and no-cash-out refinances delivered to the agencies. This new loan level price adjustment will effect loans with a sell date of September 1, 2020 and will not affect purchase loans.
The fee is quite a hit for all lenders, credit unions and members alike. “Requiring Fannie Mae and Freddie Mac to charge a 0.5% fee on refinance mortgages they purchase will raise interest rates on families trying to make ends meet in these challenging times,” said MBA President and CEO Bob Broeksmit, CMB in a statement regarding the GSEs’ new adverse market refinance fee. For a loan of $300,000 a .5% fee would be $1,500.
Members are refinancing in dire need of lowering their mortgage payments to stay afloat. “Given the serious challenges faced by American families due to the economic impacts of COVID-19 emergency, we are unable to understand why the GSEs would be encouraged or allowed to undermine the mortgage refinancing market, one of the bright spots in our economy at the moment…Not only will this decision raise costs for credit unions and other borrowers, it may ultimately price some of our most vulnerable potential homeowners out of the market,” said CUNA President/CEO Jim Nussle.
While some organizations will be unable to assist members with this fee, CU Members Mortgage has evaluated the hundreds of loans we have in process and has determined that we will absorb this fee for those loans that have already locked in a rate and close within their original lock period or extend beyond that period through no fault of the member. “While this will be a considerable cost for our organization, we feel it’s the right thing to do for members across the country during this difficult time,” said CU Members Mortgage Senior Vice-President Steve Hewins.
“For our nearly 40 years in business, we’ve supported affordable lending solutions and offered Credit Unions and their members sustainable home loan options they can afford. We have joined along with ACUMA, CUNA, NAFCU and the MBA to bolster a call against the FHFA and this new policy,” said Hewins.
“Policymakers should be working to help credit unions help their members, not strapping them with additional fees that they will have to absorb or build into the cost of the refinance. We would ask the FHFA to reverse this policy immediately to better help America’s struggling homeowners during this uncertain time,” said NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt.
Join us in contacting FHFA Director Dr. Mark Calabria, National Economic Council Director Larry Kudlow, and leaders of the Senate Banking Committee and House Financial Services Committee to demand that the FHFA withdraw this directive immediately.
To take action, you may utilize resources available through the MBA’s Mortgage Action Alliance and their easy to use Action Center.