Yesterday, the Federal Housing Finance Agency (FHFA) withdrew its proposed loan level pricing adjustment (LLPA) upfront fee on borrowers with debt-to-income ratios greater than 40 percent, which was scheduled to take effect on August 1st, after receiving strong encouragement from the National Association of REALTORS®. In response, NAR President Kenny Parcell released a statement expressing satisfaction with the outcome:
“We are pleased that our advocacy efforts on behalf of our 1.5 million members and their clients have been successful. We commend the FHFA for responding to the industry’s concerns by eliminating this fee for borrowers with higher debt-to-income ratios. This fee would have added to the cost of borrowing at a time when affordability is already a concern and would have made these borrowers more vulnerable.
“The FHFA’s decision to seek input on other changes is also an excellent example of good governance. NAR has been working with the FHFA on the LLPAs since their inception in 2008. We are looking forward to a thorough and thoughtful process involving the public, industry, and regulators to address misconceptions and develop the best policy for homebuyers and the market.”
Earlier, NAR had asked the FHFA to require higher credit scores or larger down payments as a way to offset this risk instead of raising fees, which would only increase the borrower’s chances of defaulting. In addition, the FHFA has announced that it will solicit feedback on other new fees, such as those imposed on borrowers with higher credit scores and moderate down payments.