MReport September 2020

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M R EP O RT | 61 O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST GOVERNMENT Industry Reaction: FHFA Postpones GSE Refinance Fee The FHFA announced it has instructed Fannie and Freddie to postpone a recent refinance fee scheduled to go into effect in September. T he Federal Housing Finance Agency (FHFA) today directed GSEs Fannie Mae and Freddie Mac to delay the implementa- tion date of their Adverse Market Refinance Fee until December 1. The fee initially was scheduled to take effect September 1. FHFA also announced the GSEs will exempt refinance loans with loan balances below $125,000, nearly half of which are made up of lower income borrowers (at or below 80% of area median income). Affordable refinance products, Home Ready and Home Possible, are also exempt. The FHFA said in a statement that the fee is necessary to cover projected COVID-19 losses of at least $6 billion at Fannie Mae and Freddie Mac. Specifically, the actions taken by the GSEs during the pandemic to protect renters and borrowers are conservatively projected to cost them "at least $6 billion and could be higher depending on the path of the economic recovery." Initially, some members of the mortgage and banking industry spoke out against the 0.5% refi- nancing fee. Chief Financial Analyst, Greg McBride, CFA has been one of the first experts to comment on the postponement and exemptions, saying that while "not as good as repealing it altogether," the decision to postpone implemen- tation and exempt loan amounts under $125,000 is "certainly better" than the original conditions. Independent Community Bankers of America (ICBA) President and CEO Rebeca Romero Rainey also issued a statement on the announcement: "ICBA welcomes today's an- nouncement by the FHFA, Fannie Mae and Freddie Mac regard- ing the Adverse Market Fee on refinance loans delivered to the government-sponsored enterprises. Extending the effective date of this fee gives borrowers and lenders time to close and fund those loans that are currently in process. Further, exempting [certain] loan amounts ... will help keep those loans affordable. ICBA appreciates the FHFA's willing- ness to work with all stakeholders on this issue and looks forward to continuing to work with the agency and GSEs to support the U.S. economic recovery." Updated, August 26: NHC President and CEO David M. Dworkin added that he welcomed the decision by the FHFA. "NHC applauds FHFA's decision to delay the effective date of the new refinance fee to December 1. We look forward to working with FHFA and the GSEs to avoid any increase in the cost of refinancing for homeown- ers," Dworkin said. "Fannie Mae and Freddie Mac play a critical role in preserv- ing liquidity and safely serving mortgage consumers, especially important during this pandemic. We appreciate the decision to delay this policy change, which will allow more households to take advantage of historically low interest rates to reduce their monthly payment. It's never been more important for homeowners to reap the financial benefits and savings of low interest rates. Now is the time to encourage refinanc- ing—not make it harder." FHFA Updates on Refi, Foreclosure Prevention Data Forbearance plans declined between April and May but remain the GSEs' top tool for preventing foreclosure. T he government- sponsored enterprises (GSEs) completed 83,756 foreclosure prevention actions during May, according to new data released by the Federal Housing Finance Agency (FHFA). The overwhelming majority of the GSEs' actions in May were forbearance plans—77,218, up from 9,749 in April—while 4,577 were loan modifications, 1,598 were repayment plans and 77 were charge-offs-in-lieu. The FHFA reported initiated forbearance plans declined from 989,594 in April to 392,338 in May. The total number of loans in for- bearance plans at the end of May was 1,450,557, which represented slightly more than 5% of the total loans serviced by the GSEs. The GSEs also completed 286 home forfeiture actions in May, which consisted of 218 short sales and 68 deeds-in-lieu. Furthermore, the FHFA detailed the GSEs' 30-59 days delinquency rate fell to 2.53% in May, but the serious delinquency rate inched up by less than a quarter-percentage point to 0.86%. Third-party and foreclosure sales totaled 344, down from 260 in April, and the decline was at- tributed to the GSEs' suspension of foreclosures in response to the COVID-19 pandemic. As a result of foreclosures being suspended, foreclosure starts fell from 3,229 in April to 2,316 in May. Elsewhere in May, the FHFA determined the GSEs' total refi- nance volume rose to their highest levels in seven years as mortgage rates tumbled—the average inter- est rate on a 30-year fixed rate mortgage slid from 3.31% in April to 3.23% in May. During May, 14 refinances were completed through the High LTV Refinance Option, bringing total refinances through this channel to 46 since its inception earlier in the year. The percentage of cash-out refi- nances dipped from 30% in April to 28% in May. Fannie Mae and Freddie Mac have completed 4,534,370 since they were put into federal conser- vatorship in September 2008, with more than half of these actions consisting of permanent loan modifications.

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