The Federal Housing Finance Agency (“FHFA”) announced that it has rescinded the proposed debt-to-income (“DTI”) loan level price adjustments (“LLPAs”) that were set to be charged by Fannie Mae and Freddie Mac beginning on August 1, 2023.
FHFA originally proposed loan level price adjustments in January 2023 as part of a larger set of changes announced for the overall single-family pricing framework, with a focus on upfront fees. The LLPAs would have been applicable to borrowers with a DTI ratio at or above 40% on conventional loans sold to Fannie Mae and Freddie Mac.
The LLPAs were first announced with an effective date of May 1, 2023, but this was later pushed back by three months, giving industry stakeholders time to provide feedback on the challenges of implementing fees based on DTI, which can change during origination and cause a need for frequent recalculation.
While the LLPAs would have benefitted some first-time homebuyers, the structure of the fees would have led to generally higher fees for some borrowers in higher credit score ranges. As a result, the FHFA determined to not implement the LLPA requirement at this time but is looking toward other ways of implementing changes in the future to improve affordability in a higher interest rate environment.
The FHFA subsequently issued a Request for Input (“RFI”) regarding its overall single-family guarantee fee pricing framework, including which goals FHFA should pursue in its oversight of Fannie Mae and Freddie Mac to support affordable, sustainable housing while fostering liquidity in the secondary market. All feedback must be submitted via FHFA’s website by August 14, 2023.
