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...