Washington, D.C. – Today’s decision by the Federal Housing Finance Agency (FHFA) to rescind fees based on a borrower’s debt-to-income (DTI) ratio for loans acquired by Fannie Mae and Freddie Mac (the Enterprises) will help well-qualified, first-time homebuyers whose total debt load approaches the 40% ratio. Borrowers who have proven adept at managing their obligations do not pose additional risk due to a few points on a DTI ratio. In fact, many will save money by becoming homeowners in areas where rents are high. The DTI-based fees would have been confusing to borrowers and extremely difficult for lenders to implement.
FHFA Director Sandra Thompson has been very responsive to the concerns of the industry and housing advocates by delaying implementation of the DTI fees. Today’s announcement the fees will be rescinded confirms this.
NHC is also very supportive of the upcoming Request for Information (RFI) on loan pricing. The RFI process is essential to examine a widely misunderstood and highly technical risk-based pricing grid that needs thoughtful review. This issue cannot be addressed in talking points, sound bites, or editorials.
Risk-based pricing through loan level price adjustments (LLPAs) has outlived its purpose. Guarantee fees (G-fees) on loans purchased by the Enterprises are the appropriate mechanism for investors to pay for guarantees on the timely payment of principal and interest on mortgage-backed securities, ensuring a liquid and efficient market. To create a fair playing field for first-time homebuyers across all income levels, Fannie Mae and Freddie Mac should charge the same G-fee for everyone, as was the practice between 1938 and 2008, and as FHA loans do today.
NHC looks forward to working with Director Thompson and a wide range of stakeholders to find the right balance for expanding opportunity, purchasing sustainable mortgages, and protecting the interest of taxpayers by ensuring the Enterprises are operating safely and soundly and meeting their obligations to serve all Americans.
About David Dworkin: David Dworkin is a former Treasury Department official in the Obama and Trump Administrations and has led the National Housing Conference since 2018.
About NHC: The National Housing Conference is a diverse continuum of affordable housing stakeholders who convene and collaborate through dialogue, advocacy, research, and education, to develop equitable solutions that serve our common interest. Our vision is an America where everyone is able to live in a quality, affordable home in a thriving community. Politically diverse and nonpartisan, NHC is a 501(c)3 nonprofit organization.