FHFA Rescinds Biden Administration’s ‘Confusing’ DTI Fees Rule


The Federal Housing Finance Agency (FHFA) has rescinded the upfront fees based on borrowers’ DTI ratios for loans acquired by Fannie Mae and Freddie Mac.

In March, the agency announced it would delay implementation of the controversial rule in order to engage with industry stakeholders and better understand their concerns.

Widely opposed by the mortgage and real estate industries, the proposed loan level pricing adjustment (LLPA) upfront fee on borrowers with debt-to-income ratios greater than 40% was slated to go into effect Aug. 1.

“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 a 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.”

Consistent with the Enterprise Regulatory Capital Framework finalized in 2020, appropriately capitalizing Fannie and Freddie is critical to ensuring that they are positioned to meet their mandate of providing liquidity and stability to the secondary mortgage market and supporting access to affordable mortgage credit throughout the nation, the FHFA’s release states.

Bob Broeksmit, CMB, president and CEO of the Mortgage Bankers Association (MBA), says the MBA has “strongly opposed FHFA’s planned debt-to-income loan level pricing adjustment since it was announced in January and have led advocacy efforts calling for its removal.”

“The proposed fee was unworkable for lenders and would have confused borrowers and undermined the customer experience,” Broeksmit says in a statement. “We are pleased that [the] FHFA engaged with industry stakeholders, recognized the negative impacts of the fee, and decided to rescind its implementation.” 

“[The] MBA urges [the] FHFA to continue its engagement to improve clarity and transparency regarding the GSEs’ pricing framework,” Broeksmit adds. “We will continue our work with the agency, the GSEs, 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,” Parcell says in a statement. “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. “NAR has worked with the FHFA to shape the LLPAs since their inception in 2008. 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.”

Photo: Bill Oxford

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