Pushing back against the adverse market fee

capitol building illustration

Thousands of messages from community bankers turned the tide in delaying a tax that would have unnecessarily hurt their customers. That’s grassroots in action.

By Ron Haynie and John Coleman


What can 1,200 community bank advocates sending 3,700 messages to Capitol Hill over one week accomplish? An awful lot.

We were reminded of this fact again this summer when helping to convince the Federal Housing Finance Agency (FHFA), Fannie Mae and Freddie Mac to rethink their implementation of the adverse market fee on refinance loans delivered to the government-sponsored enterprises, or GSEs.

Community bank mortgage lenders and consumers were caught off guard in August when the FHFA announced plans to impose a fee of 50 basis points on most refinance mortgages that are delivered to the GSEs as of Sept. 1, 2020. It was a major fee added with minimal notice or explanation.

At the time, many loans that were scheduled to close after the fee took effect had already been locked down with borrowers, which gave community bank mortgage lenders no choice but to absorb the fee. ICBA was concerned that by applying the fee retroactively to loans where the pricing was locked with consumers, the FHFA and GSEs would have caused millions of dollars in financial losses to lenders who were struggling to comply with government-mandated forbearance, loan workouts and modifications on all forms of credit in response to the COVID-19 pandemic.

There is no substitute for having constituents reach out to their government and explain the real-world impact of policy decisions and regulations.

Meanwhile, ICBA and community banks were also concerned that the adverse market fee would unnecessarily raise the cost of mortgage credit for community banking customers and will negatively affect the sectors of the U.S. economy that have thus far weathered the steepest economic downturn in modern history.

ICBA called for the FHFA and GSEs to immediately rescind the destructive and unnecessary tax on homeowners and called on community bankers to make their voices heard.

An alert quickly went out through the ICBA Grassroots Action System encouraging members to reach out to Congress on this time-sensitive issue. Community bankers were empowered to advocate for themselves with a prewritten email that they could easily send to their members of Congress to make the case that the adverse market fee would have a negative economic impact on community bank mortgage lenders and consumers.

Community bankers answered the call to action with overwhelming enthusiasm, sending thousands of emails over a few days and reaching more than 60% of congressional offices. It was a phenomenal response by motivated community bankers who were already maxed out helping small business customers work through the Paycheck Protection Program (PPP) and supporting consumers and local communities struggling to find a new normal. Those common-sense pleas for action were heard.

Grassroots results

Within days, the FHFA shifted course, delaying the fee until Dec. 1. That will give community bank mortgage lenders enough time to process and close loans locked in before the fee was announced. The FHFA also exempted loan amounts of less than $125,000, which mainly comprise lower-income borrowers. Refinance loans through Fannie Mae’s HomeReady and Freddie Mac’s Home Possible lines are also exempt. This decision will help keep those loans affordable.

The FHFA explained the fee was necessary to cover projected COVID-19 losses. Like community bankers, the GSEs will incur increased expenses and losses as they work to provide relief to borrowers affected by the coronavirus pandemic. The adverse market fee will help the GSEs deal with those increased expenses of at least $6 billion while protecting taxpayers. This includes:

  • $4 billion in loan losses due to projected forbearance defaults
  • $1 billion in foreclosure moratorium losses
  • $1 billion in servicer compensation and other forbearance expenses.

The losses may be greater depending on how long economic recovery takes, leaving an end-date to the consumer fee up in the air for now.

The FHFA’s move shows the power that ICBA’s member banks generated. The groundswell of support from community bankers across the country who sent letters to their elected representatives, members of the House and Senate banking committees, and the FHFA helped turn the tide. The entire industry and Capitol Hill saw the problem with the fee and convinced the agency that its policy needed to change.

It shows what can be done when community bankers make their voices heard loud and clear. While ICBA’s government relations team works tirelessly to raise awareness of community bank issues on Capitol Hill and within regulatory agencies, it is no substitute for constituents reaching out to their government and explaining the real-world impact of policy decisions and regulations. Those agencies and representatives are listening. Speaking up in unison resulted in positive movement for the industry and the communities it serves.

ICBA appreciates the FHFA’s willingness to work with all stakeholders on this issue and looks forward to continuing to work with the agency and the GSEs to support an economic recovery in the U.S.


Ron Haynie (ron.haynie@icba.org) is ICBA’s senior vice president of mortgage finance policy
John Coleman (john.coleman@icba.org) is ICBA’s director of advocacy

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