In January of 2023, the Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac (the GSEs), directed them to change their loan level pricing adjustments (LLPAs)—upfront fees the GSEs charge individual borrowers based on their credit score, down payment, or other risk factors. Fees were raised on some stronger-credit borrowers. Lenders are required to start complying with these adjustments starting May 1, and have been adjusting pricing since March to accommodate these requirements. NAR continues to urge FHFA to rescind this measure that is unnecessary given their current financial strength and the affordability concerns plaguing homebuyers nationwide. Also, starting on August 1, FHFA will impose a new fee on borrowers with debt-to-income ratios (DTIs) greater than 40 percent. NAR opposes this upfront fee as DTI is a poor measure of a borrower’s ability to repay and urges the FHFA to reconsider tying any fees to fluctuating factors such as DTI that may make homebuying further out of reach for more Americans.
NAR is working alongside industry partners to urge regulators to rescind the increased fees on borrowers with higher credit scores and remove the DTI-based LLPA before the August implementation date. NAR strongly opposes this fee since DTIs can change during the financing process, making it difficult to underwrite the loans and making it more likely for a borrower to default given the higher DTI that results from the additional fee imposed. NAR advocates for the use of compensating factors, where a borrower with a risky factor like low credit score must have a larger down payment or lower DTI.
The GSEs have an obligation to support a national market of all groups and they are making strong profits. Thus, the GSEs could simply reduce the fees for lower credit borrowers and maintain the others at the same cost—especially given the sharp decline in affordability over the last year and the GSEs' function as market utilities with a Congressional charter.
NAR has publicly opposed the changes and continues to share its concerns with the FHFA. We will continue to work with the Hill and industry partners to seek change.