FHFA Ends Controversial Refinance Fee

On July 16, 2021, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac will eliminate the Adverse Market Refinance Fee for loan deliveries, starting August 1, 2021. Lenders will no longer be required to pay the Enterprises (GSE’s) a 50-basis point fee when delivering refinance mortgages. 

Newly appointed acting director of the FHFA, Sandra L. Thompson said, “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. Today's action furthers FHFA's priority of supporting affordable housing while simultaneously protecting the safety and soundness of the Enterprises.”

The Adverse Market Fee was controversial ever since it was imposed on December 1, 2020, adding a 0.5% charge to total refinance costs. So, if a borrower were to refinance a $300,00 loan, they would be charged an additional $1,500 fee.  

Initially, the fee was created to cover losses projected by the COVID-19 pandemic. However, the success of the FHFA and the Enterprises were effective enough to warrant an early conclusion. The FHFA expects lenders who charged borrowers the fee will now pass cost savings back to the borrowers. 

Currently, the vast majority of Enterprise borrowers have exited forbearance. By April, only 2% of single-family mortgages guaranteed by the Enterprises were still in forbearance, down from 5% in May 2020. 

Mortgage Bankers Association (MBA) president and CEO Bob Broeksmit stated, "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.” 

"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," Broeksmit continued.

President and CEO of the American Bankers Association, Rob Nichols, said, “The elimination of this fee will improve the affordability and availability of credit for borrowers, and ultimately help those seeking to refinance into lower rate loans and improve their financial condition as the country continues to recover from the COVID-19 pandemic. ABA and its members appreciate FHFA’s willingness to hear the concerns raised by ABA and others and to take action which will greatly benefit our nation’s struggling homeowners."

For more information, visit the FHFA website.