A new rule from the Federal Housing Finance Agency (FHFA) to raise mortgage fees for those with higher credit at the benefit of those with lower credit has recently declined following backlash from over 26 states.
After the rule was proposed in January, many borrowers were pushed back, criticizing the decision as unfair and encouraging others to maintain their credit scores irresponsibly. In response to criticism, FHFA Director Sandra Thompson said, “Some updated fees are higher and some are lower, in differing amounts. They do not represent pure decreases for high-risk borrowers or pure increases for low-risk borrowers. Many borrowers with high credit scores or large down payments will see their fees decrease or remain flat.”
Still, this did not dissuade angry buyers and, in a plea to President Biden, 27 states wrote a joint letter claiming that this rule would make aspiring homeowners with good credit struggle with their purchases.
“In other words, the policy will take money away from the people who played by the rules and did things right — including millions of hardworking, middle-class Americans who built a good credit score and saved enough to make a strong down payment,” the letter said.
However, the controversial rule was short-lived as, on May 10, it was officially decided. Thompson released a second statement saying, “I appreciate the feedback FHFA has received from the mortgage industry and other market participants about the challenges of implementing the DTI ratio-based fee. To continue this valuable dialogue, FHFA will provide additional transparency on the process for setting the Enterprises’ single-family guarantee fees and will request public input on this issue.”
Following the strong opposition to the bill and subsequent voidance, many have expressed the importance of public involvement regarding such drastic changes.
President of the National Association of Realtors (NAR) Kenny Parcell had this to say:
“Likewise, the FHFA’s decision to release a request for information on the other changes is a great example of good governance. NAR has worked with the FHFA to shape the LLPAs since their inception in 2008. We look forward to a thoughtful and deliberate process for the public, industry, and the regulators to clarify misconceptions and to arrive at the best policy for home buyers and the market . NAR previously wrote the FHFA urging it to require factors such as higher credit scores or larger down payments to offset this risk in lieu of higher fees that would only raise the borrower’s risk of default. The FHFA also announced that it will conduct a request for information on other new fees, such as those imposed on borrowers with higher credit scores and moderate down payments.”
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