Fannie Mae, in Lender Letter (LL-2020-12), has announced that an “Adverse Market Refinance Fee” will be imposed on certain loans purchased on or after September 1, 2020. The new fee comes as a loan-level price adjustment of 50 basis points (0.500%) applicable to all Limited cash-out refinances and Cash-out refinances. Freddie Mac has imposed an identical fee.
The move comes amid historically low interest rates fueled by the COVID-19 pandemic. Fannie Mae justifies the new fee as a hedge against “market and economic uncertainty resulting in higher risk and costs incurred by Fannie Mae.”
It is unclear if the fee is here to stay considering the concerns expressed from powerful sources, including the White House and the National Association of Realtors. The Trump Administration reported to The Wall Street Journal that “The White House has serious concerns with this action, and is reviewing it.”
Industry groups have universally condemned the new fee, including the National Association of Federally-Insured Credit Unions (NAFCU). NAFCU sent a letter to the director of the Federal Housing Finance Agency, requesting the new policy be reversed, arguing it will “have a negative impact on the housing market and could hurt economic recovery efforts.”
We will continue to monitor and report developments on this issue. Please contact us if you have any questions.