The Federal Housing Finance Agency reversed course Wednesday on a plan to impose new mortgage fees based on a borrower’s debt-to-income ratio, but the agency is keeping another new unpopular fee that hits some homebuyers who have higher credit scores.
Homebuyers getting loans through Fannie Mae or Freddie Mac were facing a new fee of 0.375% on Aug. 1 if their house payment and other debts were more than 40% of their monthly gross income. The FHFA said Wednesday it has “rescinded the upfront fees based on borrowers’ [debt-to-income] ratios for loans acquired by Fannie Mae and Freddie Mac.”
After hearing an outcry from realtors and others in the mortgage industry, FHFA Director Sandra Thompson said the agency “will provide additional transparency on the process for setting … single-family guarantee fees and will request public input on this issue.” She said more details on the fee-pricing framework will be released shortly.
Top Republicans in Congress praised the move but said the FHFA should go further and rescind all the new fee changes announced in January, including one that will force some good-credit homebuyers to pay higher costs to subsidize poor-credit borrowers.
“I’m glad to see the FHFA rescind its unworkable changes to debt-to-income ratio-based fees,” said House Financial Services Committee Chairman Patrick McHenry, North Carolina Republican. “Director Thompson should have done the same with FHFA’s changes to the upfront Loan-Level Pricing Adjustment fees that went into effect on May 1st, but she did not. Instead, Congress will now take action to end this tax on creditworthy borrowers.”
Before the LLPA rule change on May 1, a borrower with a credit score of 740 and a 15% down payment would have faced a 0.25% fee on their mortgage. After the change, the fee jumped to 1%, while some new borrowers with lower credit ratings saw their fees decline.
Critics have accused the Biden administration of trying to engineer housing opportunities through the fee changes.
David Stevens, who served as commissioner of the Federal Housing Administration during the Obama administration, said the fee changes are an attempt “to narrow the gap in access to credit especially for minority home buyers who often have lower down payments and lower credit scores.”
Mr. McHenry said his committee “will continue to hold the Biden administration’s regulators accountable for forcing progressive priorities through our financial system, rather than focusing on their statutory mandates.”
Rep. Warren Davidson, Ohio Republican and chairman of the Financial Services subcommittee on housing and insurance, said that “avoiding the FHFA’s recent distortions is important to preserve market integrity.”
“It’s imperative that we continue to push the FHFA to reassess and repeal their other agenda items that hurt creditworthy borrowers,” Mr. Davidson said.
The Mortgage Bankers Association said the proposed debt-to-income fee “was unworkable for lenders and would have confused borrowers.”
“We are pleased that FHFA engaged with industry stakeholders, recognized the negative impacts of the fee, and decided to rescind its implementation,” the group said.
National Association of Realtors President Kenny Parcell said the debt-to-income fee “would have imposed a cost on borrowers at a time in the market when affordability is already stretched and only made them riskier.”
• Dave Boyer can be reached at dboyer@washingtontimes.com.
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