BAM Key Details:
- Last week, the FHFA announced its decision to rescind DTI LLPA fees.
- While NAR and industry stakeholders praised that announcement, this week, NAR President Kenny Parcell testified against another LLPA fee issued by the FHFA—this one for borrowers with fair to good credit.
Last week, the Federal Housing Finance Agency (FHFA) announced its decision to rescind upfront fees for loan-level pricing adjustments (LLPAs) based on borrowers’ debt-to-income (DTI) ratios.
But for the National Association of Realtors® (NAR), that action alone isn’t enough. This week, NAR President Kenny Parcell testified before the House Committee on Financial Services Subcommittee on Housing and Insurance.
His focus? Another LLPA fee increase—this one for borrowers with fair to good credit profiles.
DTI LLPA Fee Rescinded On May 10, 2023
In January, the FHFA announced a slew of changes in its Loan-Level Price Adjustment Matrix. Industry stakeholders, including Mortgage Brokers Association (MBA) and NAR, were quick to voice concerns about the new fees. The LLPA fee based on DTI ratios, which would impact borrowers with DTI ratios greater than 40%, was the largest concern.
When the DTI LLPA fee was rescinded on May 10, Parcell, among others, praised the decision.
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.
NAR Now Targeting LLPA Fees for Borrowers with Fair to Good Credit Profiles
During his testimony on Wednesday, May 17, Parcell stated other LLPA fees, specifically those for borrowers with fair to good credit profiles, were unnecessary and confusing. So confusing, in fact, that they’ve led to numerous false headlines.
Homebuyers, especially those shopping at the median price point and below, are already faced with low inventory, fierce competition, and a lack of affordability options. Adding additional fees in the current market creates another hurdle for buyers to face.
The average American homebuyer faces more barriers to achieving homeownership than ever before. Uncertainty in the U.S. economy, rising inflation, increasing mortgage rates, and lack of affordable inventory continue to devastate buyer confidence. This year, U.S. home purchase mortgage applications dropped to a 28-year-low as rates jumped. First-time homebuyers historically made up around 40 percent of the market, but that has dropped to 26 percent, the lowest on record.
While Parcell noted that another fee will only make it harder for people to buy a home, he also discussed the importance of solving the biggest problem the industry faces—the lack of affordable inventory.
The best way to build wealth is through real estate…The biggest impediment remains the lack of housing affordability and supply. Without addressing this issue, housing will remain out of reach for many. Possible solutions to supply include incentives to transfer commercial office buildings into residential units, mobilizing private funds to revitalize affordable homes, or 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.
Representatives from the Housing Policy Council (HPC), the Robert H. Smith School of Business at the University of Maryland, and the Urban Institute’s Housing Finance Policy Center Urban Institute were also present for the hearing.
The industry at large, along with hopeful buyers, are awaiting changes to help increase affordable inventory. In the meantime, continue to stay on top of local data and trends, so you can educate consumers in your market.