FHFA Eliminates Fees for Conventional Loans for 20% of Homebuyers

The Federal Housing Finance Agency (FHFA) has implemented changes to fees for loans guaranteed by Fannie Mae or Freddie Mac to ensure "equitable and sustainable access to homeownership" and strengthen capital at Freddie Mac and Fannie Mae. FHFA eliminated fees for conventional loans for about 20% of homebuyers last October, making housing more affordable for low- to median-income first-time homebuyers, buyers using low-down-payment mortgage options for low-income buyers, buyers using loans offered through state and local housing finance agencies, and single-family loans that help low- and moderate-income families finance manufactured housing and rural housing purchases.

However, FHFA plans to introduce a fee on August 1 for borrowers with at least a 40% debt-to-income ratio and a 60% loan-to-value ratio, raising concerns about its reliability as an indicator of a borrower's ability to repay. The Mortgage Bankers Association has highlighted that a borrower's income and expenses can change throughout the loan application and underwriting process, especially in today's labor market, which is characterized by the growth in self-employment, part-time employment, and gig economy employment. This could create complications and problems for borrowers and lenders alike.

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