Data Facts Lending Solutions Blog

Fannie and Freddie CEOs Address Adverse Market Fee Complaints

by Matt Holmes

Aug 24, 2020 9:02:00 AM


Fannie Mae and Freddie Mac issued a combined letter Thursday responding to the grievances of lenders in the wake of the announcement of the new 0.5% fee on mortgages.

The fee, scheduled to take effect on September 1st, was granted to the GSEs by the FHFA and charges an additional 0.5% “adverse market fee” for both cash-out and non-cash-out refinances. Purchases are not included in the fee.

“Contrary to much of the criticism we have received since making this announcement, this will generally not cause mortgage payments to ‘go up.'” the GSEs said, “The fee applies only to refinancing borrowers, who almost always use a refinancing to lower their monthly rate.”

They also clarified that the .5% fee is a one-time charge, not a .5% increase on the annual mortgage interest rate.

The criticism from the industry has been fierce though. The median home price is currently $291,300, according to the National Association of Realtors. Assuming a 20% down payment, the fee will amount to an additional cost of $1,100 per loan.

The National Mortgage Bankers Association, American Bankers Association, Credit Union National Association, and the National Association of Realtors were all vocal about their displeasure, contacting the FHFA to voice their concerns and demanding a reversal of the fee.

In addition, many are perplexed by the timing of the announcement. The forbearance rate dropped to 4.94% in the first week of August, the lowest it had been since April.

Given the new circumstances, lenders are now faced with the question of how to brace for the fee. Many are wondering if it is possible to pass on the loan level price adjustment fee on to the customer, and if they can set new fees after a loan estimate is issued.


Topics: Mortgage Lending, fannie mae, Freddie Mac

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