On August 25, 2020, the Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac, announced the adverse market refinance fee implementation would be delayed until December 1, 2020. Additionally, the FHFA announced that refinances with loan balances below $125,000 will be exempt from the new fee. Two affordable refinance products, Home Ready and Home Possible, will also be exempt.
The new 0.5% fee was announced earlier in August and scheduled to become effective September 1, 2020. The new fee was scheduled to apply to all limited cash-out refinances and cash-out refinances. The announcement of the new fee drew criticism from industry groups, who argued raising borrowing costs in the middle of a pandemic would harm struggling borrowers.
The FHFA justifies the new fee as a way to cover $6 Billion in projected pandemic-related losses such as forbearance defaults and foreclosure moratoriums. The FHFA’s press release on the delay and exemptions can be found here.
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