Last week, the Federal Housing Finance Agency (FHFA) announced that it would be rescinding the proposed upfront fees based on borrowers’ debt-to-income (DTI) ratios for loans acquired by Fannie Mae and Freddie Mac. The fee would have charged a premium for borrowers whose DTI was above 40%. The FHFA originally planned to implement the fee on August 1, but after numerous complaints from mortgage industry leaders, it decided not to enact it.
Eliminating the DTI fee will simplify underwriting, provide better visibility for pricing, and “eliminate unintended incentives for borrowers to take actions like paying down debt to reduce DTI or adding or subtracting borrowers on the loan to obtain better pricing” according to the Community Home Lenders Association. Because disclosure laws require borrowers to be apprised of pricing throughout the loan process, lenders were concerned that the rule would create compliance complications due to the borrower’s fluctuating income and expenses.
Bob Broeksmit, CMB, President and CEO of the Mortgage Bankers Association, praised the FHFA's decision to rescind the fee.
“We are pleased that FHFA engaged with industry stakeholders recognized the negative impacts of the fee, and decided to rescind its implementation. MBA urges FHFA to continue its engagement to improve clarity and transparency regarding the GSEs’ (government-sponsored enterprise) pricing framework,” he said.
