Late, but not good enough for the mortgage industry. In a blog post published Thursday, Mortgage Bankers Association (MBA) President and CEO Bob Brooksmit Case the Federal Housing Finance AgencyThe (FHFA) Loan Level Price Adjustment (LLPA) related to the debt-to-income (DTI) ratio of mortgage borrowers is unfeasible and should be scrapped entirely.
FHFA argues changes to upfront rates for borrowers with a DTI of 40% or higher will make GSEs more “safe and healthy” and help them continue their mission to promote equitable and sustainable access to home ownership doing.
“Almost everyone agrees that these are worthy goals, but enacting a DTI-based LLPA is not a wise way to achieve them,” Broeksmit argued. Did. “There are reasons why the revised general qualified mortgage (QM) definition excludes the DTI ratio. According to research As a stand-alone indicator, DTI is not a strong indicator of a borrower’s ability to repay. “
Upfront pricing fees for DTI ratios of 40% and above (part of a larger series of changes to the enterprise pricing grid) were scheduled to go into effect on May 1, 2023. However, his DTI portion of the changes to the pricing grid has been postponed to August 1, 2023, and the regulator said the DTI claim will fannie mae again freddie mac 2023.
Mortgage industry trade groups such as the MBA say the new deadlines are helpful but do not solve an infeasible problem that represents both a logistical nightmare and customer confusion.
“First, tying the LLPA to the DTI ratio raises a number of operational issues and compliance challenges, and can also be frustrating and confusing for borrowers,” said Broeksmit. “In addition, DTI-based LLPAs create costly post-origination quality control disputes between lenders and GSEs. This is especially true in today’s labor market, which is being shaped by a rise in self-employment, part-time employment and ‘gig economy’ employment. “
Broeksmit said some items aren’t on your credit report (such as child support or alimony), while others are estimated at the time of application, such as HOA dues, hazard insurance, and property taxes. , and may change at the time of closing, so costs can fluctuate significantly.
“A borrower who was offered one interest rate when applying for a loan was approaching the deadline and was told by the lender that the loan had been canceled due to a slightly slower month of work or a higher insurance premium for the homeowner. The cost has crossed the FHFA’s DTI threshold, so it will go up,” he said, adding that it would result in a minimum three-day delay in closing.
Additionally, the MBA chief executive said those logistical issues created by the FHFA would extend into the post-closure process.
“Repurchase requests from GSEs have already surged. Most of these controversies relate to the calculation of income. rules are confusing and difficult to interpret consistently. A new DTI fee could mean the lender sees more “flaws” for small calculation “errors” in her DTI ratio. “
FHFA executives say they are listening to industry concerns, but have so far not indicated any willingness to spike DTI-related upfront fees.