The Federal Housing Finance Agency’s new loan-level pricing adjustments (LLPAs), which levy a larger fee on borrowers with fair to good credit profiles, are unnecessary and confusing, Kenny Parcell, president of the National Association of REALTORS®, testified Wednesday on Capitol Hill. He added that home buyers already face a lack of affordability and supply in the current market, and the LLPAs only add more undue financial pressure to those pursuing the American Dream.
“The average American home buyer faces more barriers to achieving homeownership than ever before,” Parcell told the House Committee on Financial Services Subcommittee on Housing and Insurance. “This fee increase on some borrowers is another hurdle to owning a home. But the biggest impediment remains the lack of housing affordability and supply. Without addressing this issue, housing will remain out of reach for many.”
Parcell outlined at the hearing three possible solutions to increase housing supply:
- Incentives to transform commercial office buildings into residential units.
- Mobilizing private funds to revitalize affordable homes.
- Incentivizing more owners to sell their homes by increasing the maximum amount of capital gains a homeowner can exclude on the sale of a principal residence.
Parcell praised the FHFA for rescinding one proposed LLPA fee based on a borrower’s debt-to-income ratio. The proposed fee, which would have taken effect Aug. 1, stood to impact borrowers with debt-to-income ratios greater than 40%. The FHFA also issued a request for public input on the LLPA increase on borrowers with better credit.
“This is a huge victory for consumers, as we opposed the DTI fee and believe public comment and further research from the industry, analysts and concerned consumers will help the FHFA reconsider the pricing changes in hopes of lowering fees on all borrowers,” Parcell testified.
Along with NAR, representatives from the Housing Policy Council, the Robert H. Smith School of Business at the University of Maryland and the Urban Institute’s Housing Finance Policy Center Urban Institute were present for the hearing.