The Federal Housing Finance Agency (FHFA) has announced that it has rescinded the upfront fees based on borrowers’ DTI ratios for loans acquired by Fannie Mae and Freddie Mac (GSEs). FHFA announced in March [1] it would delay implementation in order to engage with industry stakeholders and better understand their concerns.
“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,” said FHFA Director Sandra L. Thompson [2]. “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 [3] finalized in 2020, appropriately capitalizing each GSE is critical to ensuring that they are well-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.
“We have 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,” said Mortgage Bankers Association (MBA) President and CEO Robert D. Broeksmit, CMB [4]. “The proposed fee was unworkable for lenders and would have confused borrowers and undermined the customer experience. We are pleased that FHFA engaged with industry stakeholders, recognized the negative impacts of the fee, and decided to rescind its implementation.”
The FHFA adopted a final rule that establishes risk-based and leverage capital requirements for the GSEs. The final rule also makes conforming amendments to definitions in FHFA’s regulations governing assessments and minimum capital and removes the Office of Federal Housing Enterprise Oversight’s (OFHEO) regulation on capital for the Enterprises.
“MBA urges FHFA to continue its engagement to improve clarity and transparency regarding the GSEs’ pricing framework,” added Broeksmit. “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.”
National Association of Realtors (NAR) President Kenny Parcell [5] added, "Likewise, the FHFA’s decision to release a request for information on the other changes is a great example of good governance. 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. NAR previously wrote the FHFA urging it to require factors such as higher credit scores or larger down payments to offset this risk in lieu of higher fees that would only raise the borrower’s risk of default. The FHFA also announced that it will conduct a request for information on other new fees, such as those imposed on borrowers with higher credit scores and moderate down payments.”