Industry groups continue to oppose the new Fanny and Freddie fees aimed at some high-risk borrowers as a burden to lenders and consumers.
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Fannie Mae and Freddie Mac federal regulators have said they will wait until after the spring homebuying season to introduce new fees for high-risk borrowers who take out loans that could strain their finances.
While this is welcome news for real estate industry trade groups who opposed the price hikes, others would like to eliminate fees related to debt-to-income (DTI) ratios for borrowers altogether.
A new upfront fee for mortgage borrowers with a debt-to-income ratio of over 40% was set to go into effect on May 1.
However, after some lenders complained that introducing the new fees would create operational challenges, the Federal Housing Finance Agency (FHFA) announced this week The reason for delaying the introduction of the fee until August 1 is to “allow enough time for all lenders to introduce the fee”.
The new DTI ratio-based fee is a change to the pricing matrix used to calculate the upfront fee, known as the Loan Level Price Adjustment (LLPA), on the mortgages scheduled to be sold to Fanny and Freddie announced in January. was one aspect of
The FHFA has ordered Fanny and Freddy to waive upfront fees for first-time homebuyers with limited funds, but some wealthier borrowers, especially those with loans at moderately low interest rates, will charges higher fees, making up for at least some of the difference. payments and a higher debt-to-income ratio.
If not eligible for the exemption, most homebuyers with DTI ratios above 40% are subject to an upfront fee of 0.375%, which costs approximately $1,200 in the cost of taking out a $315,000 loan to purchase a median home. is added.of new price list It has also been realigned to include new credit score and loan value ratio categories, distinguishing between purchased loans, interest rate and term refinancings, and cash out refinancings. These changes are effective May 1st.
The National Association of Realtors (NAR) said in January that it supported waiving fees for first-time homebuyers with limited funds, but would not support raising fees for middle-class buyers.
From the Mortgage Bankers Association’s perspective, loan-level price adjustments based on debt-to-income (DTI) ratios also present technical challenges for lenders.
Bob Brookmitt
“From the beginning, MBA has emphasized to the FHFA that DTI-based loan-level price adjustments will not work for both lenders and borrowers,” said Bob Broeksmit, CEO of MBA. statement“DTI can fluctuate throughout the mortgage application and underwriting process, and the FHFA’s new fees will lead to inevitable changes in borrower costs between application and completion, increasing compliance costs. , would require multiple redisclosures that would confuse borrowers.”
Broeksmit said MBA members “appreciate the delay” in introducing the new fee, but the trade group “uses the extra time provided by the change in effective date to encourage the FHFA and We will continue to work with lenders to explore alternatives that do not overburden borrowers.”
In a statement to Inman Friday, a NAR spokesperson said the FHFA postponement was “reassuring … and we hope that further analysis and review of the impact of this change will take place.”
“Higher DTI upfront rates are not only difficult to operate, but also run counter to compensating factors traditionally used by businesses and government agencies to offset risk without harming consumers.” NAR said.
of Community Home Lenders in America (CHLA) issued a similar statement on behalf of small and medium-sized community-based mortgage lenders, saying the delay meant that members had “more time to adapt to the complexities created by this DTI pricing difference. It will give us more time and the FHFA will reconsider this rate increase.”
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