Mortgage News May 10, 2023
The Federal Housing Finance Agency’s (FHFA) changes to loan level pricing adjustment (LLPA) fees have faced opposition from Congress. A group of 34 Republican lawmakers in the House of Representatives introduced the Responsible Borrower Protection Act of 2023, which would block the FHFA’s amended pricing framework for Fannie Mae and Freddie Mac.
The framework includes changes such as increased pricing for borrowers with higher debt-to-income ratios and elimination of upfront fees for certain groups. However, the Mortgage Bankers Association (MBA), the National Association of Realtors, and the Community Home Lenders of America (CHLA) have raised concerns about the new fees. They fear that the fee hikes could hurt middle-class homebuyers and those looking to purchase second homes. Additionally, lending groups have raised specific concerns about the DTI-based adjustments, which they believe is an inefficient metric for a borrower’s ability to repay.
The FHFA announced in March that the fee implementation had been delayed, pushing the effective date back from May 1 to August 1 of this year. The move was met with praise from industry groups, but the MBA and CHLA have remained steadfast in pushing the FHFA to roll back the pricing changes completely. Now, Biggs and other lawmakers have joined the chorus against the fees, with Biggs’ group asserting that the new LLPA fees would “subsidize mortgage borrowers with lower credit scores beginning on May 1, 2023.”
In response to misconceptions about the FHFA’s fee changes, Director Sandra L. Thompson issued a statement clarifying that the new fees do not charge higher credit-score borrowers more so that lower credit-score borrowers can pay less. Instead, the updated fees generally increase as credit scores decrease for any given down payment level. Thompson also noted that the targeted removal of upfront fees for borrowers with lower incomes, not lower credit scores, is primarily supported by higher fees on products like second homes and cash-out refinances.
In conclusion, the FHFA’s new LLPA fees have faced opposition from Congress, industry groups, and lending groups. Despite the delay in the fee implementation, lawmakers are pushing for the pricing changes to be rolled back completely. The FHFA has released a statement seeking to clarify the misconceptions surrounding the fee changes.
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