With the housing market under continued strain, the Mortgage Bankers Association sent a letter to the Federal Housing Finance Agency (FHFA) on Friday, pushing for reconsideration of pricing changes the agency announced last month.
Among other things, the FHFA overhauled loan-level pricing adjustment (LLPA) matrices for Fannie Mae and Freddie Mac that included upfront fees differentiated by loan purpose. Those changes included new fees based on debt-to-income (DTI) ratios, such as an adjustment for applicants with DTIs above 40%. That particular addition was met with criticism from the MBA, as well as other real estate and lending groups — several of whom pointed out that, as a standalone measure, the recently revamped general qualified mortgage rule infers that DTI is an inefficient yardstick for a borrower’s ability to repay.
“The timing of these changes is especially troubling given current stressed housing market conditions already making affordability a challenge, and the fast-approaching peak homebuying season,” wrote Bob Broeksmit, the MBA’s president and CEO, in the organization’s letter.
A borrower’s income and expenses may shift during the course of a loan application, Broeksmit added, especially given the rise of alternative income models like self-employment and the gig economy. Such fluctuation throughout a borrower’s loan process could result in several changes to the pricing of the borrower’s mortgage. That, in turn, could result in “difficult compliance challenges” with regards to properly disclosing prices to borrowers, which could lead to closing delays as well as the erosion of trust in lenders.
For these reasons, Broeksmit called the DTA “unworkable” and pushed for a rollback.
The MBA also called for the FHFA to partner with “a small group of lenders to fully examine the difficulties of implementing a DTI-based LLPA.” The MBA is not the only group to raise concerns about the fee structure; the National Association of Realtors has raised similar concerns about the added fees’ DTI-based nature and timing, while the Community Home Lenders of America has called for an accompanying decrease to FHA loan fees to mitigate the new pricing grid.