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After industry opposition to a fee that would have levied an upfront fee on borrowers with debt-to-income ratios greater than 40 percent, the Federal Housing Finance Agency announced it’s dropping the plan.
The fee was slated to go into effect Aug. 1 and was part of a broader series of changes to the way Fannie Mae and Freddie Mac priced loans that went into effect on May 1. The changes were intended to modernize how risk was priced into loans and raise more capital for Fannie and Freddie in line with a 2020 plan to ensure the two GSEs were able to keep providing liquidity and stability in the secondary mortgage market.
The DTI fee was called “unworkable” by the Mortgage Bankers Association. The influential trade group had been worried about logistical hurdles mortgage lenders would face implementing the fee and concerned that gig-worker borrowers could be hit with the fee who wouldn’t ultimately need to pay it as their income changed over the loan application process.
FHFA Director Sandra L. Thompson said in a statement that “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.”
The agency said it planned to release a new request for information soon on other fees levied on borrowers.
“We are pleased that FHFA engaged with industry stakeholders, recognized the negative impacts of the fee, and decided to rescind its implementation,” MBA President and CEO Bob Broeksmit said in a statement. “MBA urges FHFA to continue its engagement to improve clarity and transparency regarding the GSEs’ pricing framework. 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.”
Wednesday’s change does not, however, mean that other parts of the new fee package are changing. Among the pieces staying in place: a new matrix of fees that were the subject of considerable misinformation including claims that they amounted to a tax on buyers with high credit scores to pay for a lowering of fees for borrowers with poor credit.
