Debt to Income Mortgage Fees Canceled
The Federal Housing Finance Agency (FHFA) has rescinded the upfront fees based on a borrower’s debt to income ratios (DTI) for loans acquired by Fannie Mae and Freddie Mac.
The fees were widely opposed by the mortgage and real estate industries. The add-on fees would have been for borrowers with DTI ratios of greater than 40%. The fees were scheduled to begin on August 1st of this year.
“I appreciate the feedback FHFA has received from the mortgage industry and other market participants about the challenges of implementing the DTI ratio-based fee,” says Sandra L. Thompson, director of the FHFA, in an official statement. “To continue this valuable dialogue, FHFA will provide additional transparency on the process for setting the Enterprises’ single-family guarantee fees and will request public input on this issue.”
According to Bob Broeksmit, CEO of the Mortgage Bankers Association (MBA), “The MBA has strongly opposed FHFAs planned DTI loan level pricing since it was announced in January and has led advocacy efforts calling for its removal. The proposed fee was unworkable for lenders and would have confused borrowers and undermined the customer experience. We are pleased that the FHFA engaged with industry stakeholders, recognized the negative impact of the fee, and decided to rescind its implementation.” Broeksmit adds, “We will continue to work with the agency, lawmakers, and the Biden administration on policies and actions that lower costs and advance sustainable access to homeownership while protecting taxpayers.”
Kenny Parcell president of the National Association of Realtors, which also rallied against the measure, applauded the reversal.
“We applaud the FHFA for listening to the industry’s concerns by choosing to drop this fee on borrowers with higher debt-to-income ratios. It would have imposed a cost on borrowers at a time in the market when affordability is already stretched and only made them riskier.
“Likewise, the FHFA’s decision to release a request for information on the other changes is a great example of good governance,” Parcell adds. “We look forward to a thoughtful and deliberate process for the public, industry, and the regulators to clarify misconceptions and to arrive at the best policy for home buyers and the market.”
Specifically, the fee would inflict on borrowers with a greater than 40% DTI a fee of 0.375% on their loan amount.
Broeksmit also said tellingly, “Imagine being a borrower who is quoted one rate when applying for a loan, then getting near closing and hearing from your lender that, due to a slightly slower month at work or a higher homeowner’s insurance premium, the cost of your loan will have to go up because you exceeded FHFA’s DTI threshold,”