ICBA: Freddie Mac’s volume requirement change would burden community banks

Freddie MacThe Independent Community Bankers of America expressed concern last week regarding a recent policy change at Freddie Mac that it said could hinder community banks’ ability to provide consumer mortgages.

Beginning on Jan. 1, an institution that does not meet certain volume requirements for the previous calendar year will be charged a low activity fee of $7,500, which Freddie Mac said will “support [its] risk management efforts” and help make up costs.

In order to avoid the low activity fee, an institution must either sell mortgage to Freddie Mac with an unpaid principal balance greater than $5 million during the preceding calendar year or service Freddie Mac mortgages with a UPB of at least $25 million as of Dec. 31 of the preceding calendar year.

The ICBA said in a letter to Freddie Mac and the Federal Housing Finance Agency that the $7,500 annual low activity fee would not be feasible for many smaller community banks, adding that many institutions would be forced to sell their servicing portfolios, ultimately terminating their relationship with Freddie Mac.

“Most community bank loans are of superior credit quality, resulting in few, if any, losses for Freddie Mac,” ICBA Senior Vice President of Mortgage Finance Policy Ron Haynie said. “Nevertheless, while recent announcements indicate high to record earnings for Freddie Mac, it is choosing to impose an unaffordable fee on small lenders, most of which have sold loans exclusively to Freddie Mac for many years. ICBA understands the need for Freddie Mac to charge the appropriate level of fees to support their business expenses, but this goes too far.”

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