Crist Leads Bipartisan Letter Calling on Fannie and Freddie Regulator to Repeal Trump Refi Tax
St. Petersburg, FL – U.S. Representative Charlie Crist (D-FL) joined Congressman Denny Heck (D-WA) and Congressman Lee Zeldin (R-NY) to lead a bipartisan letter to the Federal Housing Finance Agency (FHFA) urging cancellation of a new fee on homeowners looking to refinance. The letter was signed by 41 Members of Congress.
“Right now, Americans are facing unprecedented financial burdens stemming from COVID-19 – and many are finding themselves unable to make mortgage and other payments during this crisis,” said Heck. “This is simply the wrong time to be raising costs on homeowners who have chosen to refinance. What’s more, increasing housing fees during economic recovery has a history of failure. We must learn from the lessons of the 2008 financial crisis and allow American families to recover from this pandemic.”
The fee announced by Fannie Mae and Freddie Mac would be put in place on September 1 on refinance loans they purchase. Millions of Americans refinance their mortgages to save money, and as the COVID-19 pandemic has wreaked havoc on American families and the economy, homeowners have taken advantage of low interest rates to refinance to lower their monthly payments or access needed extra cash. Adding refinancing fees to be implemented in mere weeks would place additional costs and uncertainty on borrowers who choose to refinance their mortgage, and risks interfering with economic recovery.
A pdf of the letter can be found here, with text appearing below.
August 21, 2020
The Honorable Mark A. Calabria
Dear Director Calabria:
We write you today to share our concerns with the recent announcements by Fannie Mae and Freddie Mac that they will begin charging a 50-basis point, or 0.5%, loan level price adjustment (LLPA) on most refinance loans they purchase beginning on September 1. In addition to raising costs on our constituents without sufficient justification, we have concerns with how this fee increase may interfere with the broader economy’s recovery from today’s crisis and ask that you prioritize homeowners and economic recovery.
As the COVID-19 pandemic has wreaked havoc on American families’ incomes, livelihoods, and the economy at large, many families have taken advantage of historically low interest rates to refinance to tap into the equity of their home, lower their monthly payments, or both. This option has provided hundreds of thousands of homeowners with extra money in uncertain times, as well as saving them money in the long run. Adding a fee to refinancing, and making it effective in weeks, places additional costs and uncertainty on both the refinance market and on borrowers who choose to refinance their mortgage.
In announcing this new “Adverse Market Refinance Fee,” Fannie Mae and Freddie Mac (commonly referred to as government-sponsored enterprises, or the GSEs) cite market and economic uncertainty, along with higher risk and costs. However, when this policy was announced, no further explanation was provided to justify the additional cost to homeowners. On the contrary, homeowners saving hundreds of dollars per month on their mortgages are reducing their debt-to-income ratio, which reduces risk to investors. Furthermore, lenders report reverifying employment within 24 hours of closing, further reducing credit risk.
Housing has historically led the U.S. economy out of recession because it is so sensitive to interest rates. Rate cuts by the Federal Reserve help Americans afford new homes, and those new home purchases create jobs. An exception to this pattern is the painfully slow recovery from the recession that followed the 2008 financial crisis. In 2010, despite rate cuts and even purchases of mortgage-backed securities by the Federal Reserve, the economy and housing market remained weaker for an extended period of time, in part due to increased housing fees.
Fannie Mae, Freddie Mac, and Federal Housing Finance Agency (FHFA) have taken crucial steps throughout this pandemic to protect homeowners and our economy. That is why we were surprised by this announcement that will make refinancing a mortgage more difficult and more expensive for even the most creditworthy homeowners. The best thing we can do for the fiscal position of the United States is to allow the economy to recover as quickly and robustly as possible. To that end, we request that FHFA and the GSEs reconsider this fee as our country recovers from COVID-19. We look forward to continuing to work with you to support the housing market and homeowners across our country.
Denny Heck Lee Zeldin
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