I started a Franz campaign earlier today and have been seeing the same issue. Would be nice if this got fixed.

have the same issue yes, also accepting refugees as dwarves also increases confederation cost in the great book of grudges massivly.

I am seeing the same issue. Took me a bit to figure out why fealty was dropping.

Just tanked my campaign due to it.

Does the fealty drop happen only when you accept the refugees of an elector count faction (e.g. Wissenland, Averland etc.), or also for Gelt, Volkmar and Wulfhart?

Corroborating that this does occur when accepting refugees. Refusing them does not incur the fealty penalty. I was however able to accept Markus without the fealty hit. Unsure about the others still.

Yep, got the same issue. Fealty decreased by 2 for each elector count after accepting my first set of refugees.

A similar issue with Bretonnia in which a lot of chivalry is lost after taking on refugees as if I declared war on a Bretonnian faction. Furthermore, I also suffer reliability rating when I take on refugees from factions I had treaties with. Also, I get condemned by other factions of the same race for that.

Is this because the recent Empire rework after ToD? Karl's way of confederating other elector count is now by using the Emperor Decree "Unify" to force confederate an elector count at the cost of 2 fealty of all the other electors.
As this mod recruit LL by using confederation, it also causes 2 fealty cost to all other electors as if Karl uses the "Unify" Emperor Decree option.

I think it's critical. So, can't this bug be fixed?

I sorted it by adding a db file pooled_resource_factor_junctions_tables
In the file I added the row
wh2_dlc13_resource_factor_loyalty_declared_war declared_war_on_elector_counts emp_loyalty 0 0
So far it works, I hope it won't screw my campaign down the line...

I'm having the same issue still.

Not for me, but my friend got this problem when he played Franz in our MP game.

It is not a bug but how it work in the background. When you accept the refugee, you declare war on them, peace, then confederate immediately which is why fealty got reduce because you declare war on the fellow Empire faction in the game eye. This does not affect Gelt, and Vokmar until they own a settlement within the empire land. Markus got his own mechanic and doesn't play politic mechanic.

Unless you modded your game with unique lords for each empire state, best to just kill the refugee since you can just revive them anyway if you want to.