FHFA Postpones DTI-Related LLPA Fee Rollout

Mortgage News March 29, 2023

The FHFA has delayed the enforcement of an additional initial fee for borrowers with elevated debt-to-income ratios who use Fannie Mae and Freddie Mac services. The move followed criticism from the mortgage industry, which argued that lenders would not be able to accurately determine a borrower’s actual income before rates had to be locked. The fee was part of a larger series of changes to the Enterprises’ pricing grids, which had prompted concerns from the National Association of Realtors and the Mortgage Bankers Association about increased pricing and how it could hurt middle-wealth homebuyers.

The upfront pricing fee on DTI ratios of 40% or more was originally scheduled to take effect on May 1, 2023. FHFA Director Sandra Thompson announced on Wednesday that the effective date of the DTI ratio-based fee would now be delayed by three months until August 1, 2023, to ensure lenders have enough time to implement the fee. According to Thompson, between August 1, 2023, and December 31, 2023, the Enterprises will not impose any post-purchase price adjustments on lenders for loans acquired that are subject to the DTI ratio-based fee.

Aside from the new DTI fee, there were also notable increases in Loan-Level Price Adjustment (LLPA) fees for most “cash-out” loans. The new pricing matrix also meant that investors would pay higher fees. Borrowers with FICO scores between 720-739 and 740-759 would pay more in LLPA fees. However, there were some positives for borrowers, including permanently reduced or eliminated fees for first-time homebuyers as well as borrowers with low and moderate incomes.

The Community Home Lenders Association, which represents smaller lenders, welcomed the FHFA’s decision to delay the implementation of the DTI rule, describing it as the industry’s biggest bugbear. The group’s executive director, Scott Olson, said the delay would give independent mortgage banks (IMBs) more time to adjust to the complications created by the DTI pricing differential. However, Olson called on the FHFA to consider a full repeal of the DTI fee.

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