The House Financial Services Committee held on September 16 a hearing to review the Federal Housing Finance Agency’s (FHFA) response to the coronavirus pandemic. Mark Calabria, FHFA director, served as the hearing’s sole witness. Members discussed the implications of a half-percent fee that would apply to most refinance transactions for Fannie Mae and Freddie Mac-backed mortgages, costing the average borrower $1,400 over the life of the loan.
Over 8.4 million homeowners are behind on their mortgage payments, another 3.6 million homeowners have entered into forbearance, and nearly 8.2 million renters are behind on rent with at least 46,758 evictions having been filed in 17 US cities since the outset of the pandemic.
FHFA extended a version of the CARES Act foreclosure and eviction moratoriums for Fannie Mae and Freddie Mac-backed single-family homes until the end of the year, but FHFA has since clarified the moratorium only covers renters in Fannie Mae and Freddie Mac-owned single-family properties, covering fewer than 500 renters. FHFA later approved forbearance extensions for multifamily property owners with Fannie Mae or Freddie Mac-backed mortgages, under the condition that multifamily owners who receive the extension continue to provide CARES Act eviction protections for renters. FHFA’s internal analysis shows that approximately 170,000 units of multifamily housing are eligible for eviction protections because they are receiving forbearance.
In August, FHFA approved a half-percent fee on lenders that would apply to most refinance transactions for Fannie Mae and Freddie Mac-backed mortgages. The Mortgage Bankers Association estimated this new fee would cost the average borrower $1,400 over the life of the loan. The fee aims to cover the $6-10 billion in losses that Fannie Mae and Freddie Mac are expected to incur due to expected loan losses, projected forbearance defaults, and other forbearance-related expenses and fees. The decision was roundly criticized by the industry, advocates, and the White House, leading FHFA to push back the effective date of the fee to December 1, 2020.
House Financial Services Committee Chairwoman Maxine Waters (D-CA) and her colleagues raised concerns about the additional fee, stating that homeowners needed additional money in their pockets during the pandemic and coinciding recession. Analysis from the Urban Institute indicated the fee would prevent 255,000 borrowers from accessing affordable mortgage credit and disproportionately impact minority communities. Households that refinance their homes have lower rates of forbearance; because the fee would pose a barrier to refinancing, it may lead to higher rates of forbearance. Representative Brad Sherman (D-CA) encouraged FHFA to consider a lower fee over a longer period of time so homeowners are still able to refinance their homes during the financial crisis. In his testimony, Director Calabria countered that the CARES Act imposed unfunded costs on Fannie Mae and Freddie Mac and their congressional charters require that those costs be recouped.
Members stated that the $100 billion in rental assistance in the House-passed HEROES Act would help tenants pay their rent and, by association, landlords pay their mortgages. This would aid mom-and-pop landlords and limit the number of homeowners that go into forbearance.
Watch a recording of the hearing here.