The chorus of mortgage brokers who are calling on the Federal Housing Finance Agency (FHFA) to remove a targeted cash-out refinance fee is growing louder.
The National Association of Mortgage Brokers wants the housing regulator to consider removing the loan level pricing adjustments related to cash-out refinances, which can be up to 75 basis points when the pricing adjustments take effect on February 1, 2023.
Such a pricing increase “creates a disparate impact for current homeowners by negatively impacting pricing and payments,” the NAMB said in a statement last week.
The broker group has no issue with the FHFA eliminating upfront fees for first-time homebuyers earning less than 100% of area median income; borrowers using HomeReady and Home Possible; the HFA Advantage and HFA Preferred programs; and single-family loans supporting the Duty to Serve program.
The measure impacts mainly low-income borrowers and underserved communities, according to FHFA Director Sandra Thompson. The upfront cash-out refi fee was a tradeoff for the elimination of other fees as part of the regulator’s annual look at guarantee fees.
“NAMB understands these changes are a result of FHFA’s efforts to meet the objectives set forth in the 2022 Scorecard,” the group said. “However, the goal should be to support all borrowers, whether first-time homebuyers or long-time homeowners, thereby creating a level playing field for all.”
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A 50 bps “adverse market fee,” which was tacked onto loans starting in late 2020 and ended in July 2021, significantly boosted Fannie and Freddie’s profitability last year, according to a recent report published by the FHFA. The GSEs purchased a record $2.52 trillion in single-family loans in 2021, with the average g-fee rising 2 bps to 56 bps.
Earlier this year, the FHFA increased upfront fees between 0.25% and 0.75% for high-balance loans, tiered by loan-to-value ratio, effective April 1, 2022. For second home loans, the upfront fees increased between 1.125% and 3.875%, also tiered by the loan-to-value ratio.