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The government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac announced they will begin next month imposing a 0.5 percent fee on most mortgage refinance loans, which have increased as interest rates have been lowered. According to news reports, the move is intended to mitigate risks brought on by the coronavirus pandemic.

"Fannie Mae and Freddie Mac's decision to charge higher mortgage refinance fees will put additional pressure on credit unions as they continue to work to meet the needs of their members," said NAFCU Executive Vice President of Government Affairs and General Counsel Carrie Hunt. "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. We would ask the FHFA to reverse this policy immediately to better help America's struggling homeowners during this uncertain time."

In response to the announcement, NAFCU sent letters to Federal Housing Finance Agency (FHFA) Director Dr. Mark Calabria, National Economic Council Director Larry Kudlow, and leaders of the Senate Banking Committee and House Financial Services Committee noting the negative impact the adverse market refinance fee could have on the housing market and efforts to recover from the coronavirus pandemic.

"Although preserving the safety and soundness of our nation’s mortgage industry is a top priority, credit unions and borrowers are facing significant challenges due to the pandemic and economic recession," wrote Hunt in the letters. "This new fee puts credit unions in the difficult position of absorbing the cost or passing it onto their members as part of the cost of the refinance."

Hunt argued that borrowers who are dissuaded from refinancing their loans because of the fee could look to forbearance and potentially increase their risk of defaulting on loans. She also highlighted how credit unions have stepped up to support members financially impacted by the virus and the operational difficulties they are facing as a result of the economic crisis.

NAFCU also joined with several other financial services and housing trade associations to bolster its call against the FHFA moving forward with this policy.

Amid the pandemic, the FHFA has taken several steps to support the housing industry as the CARES Act allowed borrowers experiencing financial hardship to request forbearance on single-family and multifamily loans sold to the GSEs. In response, mortgage servicers must provide a forbearance that allows borrowers to defer their mortgage payments up to 180 days with an option for an additional 180-day extension. However, the CARES act does not provide relief for mortgage servicers, such as credit unions.

The FHFA heeded NAFCU's call to provide mortgage servicers with some relief and provided a four-month limit on advances of principal and interest payments for loans in forbearance sold to the GSEs. It has also allowed the GSEs to purchase certain-single family mortgage loans in forbearance and extended the policy for loans originated through Aug. 31, 2020.

The agency in July released revised housing goals for 2021 in light of the coronavirus pandemic and the uncertainty surrounding its economic impact. It previously issued its 2019 Report to Congress, which included an outline of efforts to ensure safety and soundness within the housing market and the GSEs financial condition, as well as its response to the coronavirus pandemic.

Calabria is working to remove the GSEs from conservatorship by 2021 or 2022 and in May the agency released its updated capital rule proposal for the GSEs. NAFCU has been generally supportive of the FHFA's efforts to allow the GSEs to rebuild capital but continues to advocate that certain safeguards are codified by Congress before removing the GSEs from conservatorship.

NAFCU will continue to monitor the FHFA's efforts to support liquidity in the mortgage market and work with the agency to ensure credit unions' concerns are addressed. Get the latest on housing market issues at NAFCU's Virtual Congressional Caucus next month as Calabria is among key officials set to address attendees.