Breaking News for Homebuyers | Rescinds the Upfront Fees Based on Debt-To-Income

BREAKING NEWS! This is huge for homebuyers!

At the beginning of the year, the Federal Housing Finance Agency (FHA) implemented a new fee structure that required upfront fees based on borrowers’ debt-to-income (DTI) ratios for loans acquired by Fannie Mae and Freddie Mac. This increased pricing for borrowers with higher debt-to-income (DTI) ratios. The change proved unpopular from the start, with several real estate and lending groups being vocal in their criticisms early and often.  

Many noted that DTI has been previously shown to be inconsistent at evaluating a borrower’s ability to repay and that the qualified mortgage rule had been amended to reflect that. Additionally, changes in a borrowers’ income and expenses could happen multiple times over the course of the loan procedure. With disclosure laws requiring lenders to properly alert borrowers of pricing throughout the application process, several voiced concerns that DTI-based fees would have put an unmanageable compliance burden on many companies, especially smaller ones.

After a lot of backlash, the Federal Housing Finance Agency decided to rescind the controversial DTI-based upfront fees!

“Today’s decision by the Federal Housing Finance Agency (FHFA) to rescind fees based on a borrowers’ debt-to-income ratio for loans acquired by Fannie Mae and Freddie Mac … will help well-qualified first-time homebuyers whose total debt load approaches the 40% ratio,” said David Dworkin, president and CEO of the NHC. “Borrowers who have proven adept at managing their obligations do not pose additional risk due to a few points on a DTI ratio. In fact, many will save money by becoming homeowners in areas where rents are high. The DTI-based fees would have been confusing to borrowers and extremely difficult for lenders to implement.”