The Federal Housing Finance Agency’s new 50-basis-point fee could cost borrowers an extra $21,000, according to a new analysis by Mortgage Capital Trading (MCT).

The “Adverse Market Refinance Fee” (AMRF) was announced by Fannie Mae and Freddie Mac last week, and will be applied to cash-out and no-cash-out refinances, with the exception of some types of construction conversion mortgages, effective Sept. 1. Fannie Mae cited “market and economic uncertainty” as justification for the fee, but the decision has been widely condemned by industry groups.

Now MCT says the new rule will cost borrowers big.

“According to data from the MCTLive! Secondary marketing platform, MCT estimates increases in borrower rates of up to 0.375%, leading to the average borrower paying as much as an additional $21,000 over the typical thirty-year loan term,” MCT said in an email to MPA.

“These FHFA-directed price adjustments do more than work against the hopeful economic rebound and the original agency charters – they undermine trust and spur uncertainty at a crucial time,” said Phil Rasori, chief operating officer of MCT. “The only way lenders can protect themselves from these risks is to increase margins across the board – according to our analysis, on the order of 75 to 100 basis points in total.”

The upshot of these margin increases, exacerbated by the short notice given by the FHFA, will be higher housing costs to borrowers, and a drag on the overall economy, according to MCT’s analysis.

“The short notice amounts to effectively no time for lenders and borrowers to react, as the typical thirty-day rate lock and the practice of ‘floating’ a rate both hurt respectively in this case,” MCT said. “Beyond the issue of timing, these actions are perpendicular to the efforts of the Federal Reserve and the administration to assist consumers and stimulate the economy in the face of the COVID-19 pandemic.”

According to MCT, the average $280,000 mortgage will cost an additional $58 per month as a result of the new fees – amounting to $2,800 in the first four years and $21,000 over a 30-year term. In California, where the average mortgage is just under $400,000, borrowers could pay almost $30,000 more over the full term.

MCT also estimated that the cost increases will be 34% higher than they would have been if the new fees were simply passed through to buyers, “indicating the significant effect of lender uncertainty due to the way the changes were communicated.”

“Whether or not economic headwinds justify these ‘adverse market’ fees, their needlessly short-notice implementation introduced ongoing risks and increased negative impacts to borrowers,” said Curtis Richins, president of MCT. “A more traditional 90-day notice would have minimized uncertainty and borrower cost increases with a negligible difference in the long-term capitalization of Fannie Mae and Freddie Mac.”