What agents need to know about the complex mortgage fee hike.
Fee changes announced by Fannie Mae and Freddie Mac lead to both legitimate concerns and misunderstandings.
Mortgage fee alterations are part of a government effort to enhance the accessibility of homeownership for underserved communities and first-time homebuyers. However, critics argued that it places middle-income borrowers, who are financially better prepared to purchase a house and present less risk for lenders, at a disadvantage.
On May 1, when the new fee structure was to go into effect, a coalition of financial officials representing 27 U.S. states wrote a letter to President Joe Biden and FHFA director Sandra Thompson, urging them to abandon the changes. These fees, commonly referred to as "upfront fees," are typically embedded in the interest rates charged to homebuyers, consequently influencing their mortgage payments.
May 10, 2023 – following significant urging from the National Association of REALTORS®, the Federal Housing Finance Agency (FHFA) rescinded its proposed loan level pricing adjustment (LLPA) upfront fee on borrowers with debt-to-income ratios greater than 40 percent that was slated to go into effect August 1st. In the wake of this announcement, NAR President Kenny Parcell issued the following statement: “We are pleased that our advocacy efforts on behalf of our 1.5 million members and their clients were successful. We applaud the FHFA for listening to the industry’s concerns by choosing to drop this fee on borrowers with higher debt-to-income ratios. It would have imposed a cost on borrowers at a time in the market when affordability is already stretched and only made them riskier.”
On May 17, 2023 Kenny Parcell, president of the National Association of REALTORS®, again testified on Capitol Hill before the House Committee on Financial Services Subcommittee on Housing and Insurance about the Federal Housing Finance Agency's (FHFA) new loan level pricing adjustments (LLPA) fee increase on borrowers with fair to good credit profiles. He stated that home buyers already face a lack of affordability and supply in the current market, these fee increases are unnecessary and confusing and the LLPAs would only add more undue financial pressure to those pursuing the American Dream.
FHFA fees, also known as loan level pricing adjustment (LLPA) fees, have been an integral part of conventional loan lending since 2008, serving to ensure the stability and financial soundness of Fannie Mae and Freddie Mac, both government-sponsored mortgage companies in the United States.
Interested in providing your opinion? The FHFA shared a request for public input regarding the LLPA increase on borrowers with better credit that is up next for review. FHFA Director Sandra L. Thompson said in a statement. “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.
