A new fee on refinances bought by Fannie Mae and Freddie Mac beginning Sept. 1 has stirred up a hornet’s nest of opposition.
That includes pushback from mortgage, banking and credit union associations, as well as from the White House itself.
The agencies Aug. 13 announced they would be adding a 50 basis point loan-level price adjustment to limited cash-out refinances and cash-out refinances they bought. The agencies said the move would be made “in light of market and economic uncertainty resulting in higher risk and costs incurred,” and would begin with whole loans bought on or after Sept. 1, as well as loans delivered into mortgage-backed security (MBS) pools with issue dates on or after Sept. 1.
Reaction was swift and widespread, condemning the move, led by a statement from the White House to the Wall Street Journal.
“The White House has serious concerns with this action, and is reviewing it,” the statement said.
Mortgage Bankers Association (MBA) President and CEO Bob Broeksmit sharply criticized the announcement.
“Tonight’s announcement by the GSEs flies in the face of the administration’s recent executive actions urging federal agencies to take all measures within their authorities to support struggling homeowners,” Broeksmit stated. “Requiring Fannie Mae and Freddie Mac to charge a 0.5 percent fee on refinance mortgages they purchase will raise interest rates on families trying to make ends meet in these challenging times. This means the average consumer will be paying $1,400 more than they otherwise would have paid. Even worse, the Sept. 1 effective date means that thousands of borrowers who did not lock in their rates could face unanticipated cost increases just days from closing.
“The housing market has been able to withstand many of the most severe effects of the COVID-19 pandemic. The recent refinance activity has not only helped homeowners lower their monthly payments, but it is also reducing risk to the GSEs and taxpayers. At a time when the Federal Reserve is purchasing $40 billion in agency MBS per month to help reduce financing costs for mortgage borrowers to support the broader economy, this action raises those costs and undermines the Federal Reserve’s policy. This announcement is bad for our nation’s homeowners and the nascent economic recovery. We strongly urge FHFA, which had to approve this policy, to withdraw this ill-timed, misguided directive.”
National Association of Federally-Insured Credit Unions (NAFCU) Executive Vice President of Government Affairs and General Counsel Carrie Hunt said the move would put “additional pressure on credit unions.”
“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,” Hunt said in a statement. “We would ask the FHFA to reverse this policy immediately to better help America’s struggling homeowners during this uncertain time.”
The Community Home Lenders Association noted the effect the move could have on the refinance market, which has been forecast to be stronger than any in nearly a decade.
“At a time when borrowers are utilizing refinances to strengthen their finances by taking advantage of historically low mortgage rates, now is not the time to raise mortgage rates and costs on working families,” the association said in a statement. “Congress, the Federal Reserve, and Treasury have been taking strong actions to support our economy; Fannie Mae and Freddie Mac should do the same – not make it tougher for families.”
In a statement, the Independent Community Bankers of America (ICBA) called on the agencies to rescind the “destructive and unnecessary tax on homeowners.”
“This decision made by Fannie Mae and Freddie Mac will unnecessarily raise the cost of mortgage credit for community banking customers and will negatively impact the sectors of the U.S. economy that have thus far weathered the steepest economic downturn in modern history,” ICBA stated. “This decision is contrary to recent legislative, regulatory, and administrative actions of Congress, the Administration, the Federal Reserve and the U.S Treasury to support consumers, and the economy.
“By applying the fee retroactively to loans where the pricing is locked with consumers, FHFA and the GSEs will cause financial losses to those lenders who are struggling to comply with government mandated forbearance, loan workouts and modifications on all forms of credit in response to the COVID pandemic. This is the wrong action at precisely the wrong time.
Finally, a coalition of associations – including MBA, NAFCU and ICBA – joined to express their displeasure.
“In spite of the fragility of the national economic recovery, the mortgage market has been able to withstand many of the most severe effects of the COVID-19 pandemic,” the trade associations said in a joint statement. “The recent refinance activity has not only helped homeowners lower their monthly payments, but it is also reducing risk to the GSEs and taxpayers. At a time when the Federal Reserve is purchasing $40 billion in agency mortgage-backed securities per month to help reduce the cost of buying or refinancing a home and stimulate the broader economy, this action by the GSEs raises those costs, contradicting and undermining Fed policy.
“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. The undersigned organizations strongly urge the Federal Housing Finance Agency, which had to approve this policy, to withdraw this ill-timed, misguided directive.”
Among other signers to the statement were the American Bankers Association, American Land Title Association, Center for Responsible Lending, Credit Union National Association, National Association of Home Builders, National Association of Realtors and Real Estate Services Providers Council (RESPRO).