Remember where you were on Aug. 13, 2020? That's the day the GSEs announced they would be adding a 50-basis point adverse market fee to all refi loans they purchased.
Remember where you were on Aug. 13, 2020? That's the day the GSEs announced they would be adding a 50-basis point adverse market fee to all refi loans they purchased. The original implementation date was Sept. 1 — causing widespread panic and outrage — but that was eventually extended until Dec. 1.
The fee was in play all the way until August 2021, and now we know how much the GSEs netted during that time: $5.3 billion.
As Senior Mortgage Reporter Georgia Kromrei writes in her article: "FHFA estimated the forbearance and foreclosure programs will cost the GSEs $7 billion to $8 billion over the next two-to-four years. The FHFA's division of research and statistics, until recently led by Calabria-appointee Lynn Fisher, made the cost projections. Of that total cost, the office expects $4 billion in anticipated defaults."
When the fee was announced, many in the mortgage industry saw it not as a needed step in risk mitigation, but ablatant money grab by the GSEs as they sought torecapitalize ahead of exiting conservatorship. Even by the time the fee was announced, the number of borrowers taking COVID-related forbearance was nowhere near what was originally feared. By August of 2021, when the fee was dropped, just 1.6% of Fannie Mae and Freddie Mac-backed loans were in forbearance.
With the benefit of hindsight, what do you think of the adverse market fee now? Prudent risk mitigation or something else? You can always let me know what you think about this and other topics at swheeler@housingwire.com.
The money Fannie Mae and Freddie Mac earned from the adverse market fee paid for nearly the entire cost of the agencies' Covid relief options, according to a FHFA inspector general report.
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