FHFA Slashes Upfront Debt-to-Income Fee Slated for August 1; the Industry Rejoices

Blog posted On May 11, 2023

After months of pushback from lenders, REALTORSÒ, and borrowers alike, the Federal Housing Finance Agency (FHFA) has finally dropped the upfront debt-to-income (DTI) fee that was scheduled to start on August 1. Just yesterday, the FHFA announced that it was rescinding its proposed fee change that would be based on borrowers’ DTI ratios after receiving notable feedback about said change from the mortgage industry.

"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," said FHFA Director Sandra L. Thompson. "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."

The fee change was first proposed in January only to receive countless complaints from associations and agencies across the industry. “The change proved unpopular from the start, with several real estate and lending groups, including the Mortgage Bankers Association (MBA), Community Home Lenders of America (CHLA) and National Housing Conference (NHC) vocal in their criticisms early and often,” writes Scotsman Guide contributor Arnie Aurellano. “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.”

Upon hearing this feedback from an overwhelming majority of the industry, the FHFA decided to delay implementing the fee change in order to “engage with industry stakeholders and better understand their concerns,” said the FHFA website.

Thus, the feedback continued.

“We have strongly opposed FHFA’s planned debt-to-income loan level pricing adjustment since it was announced in January and have led advocacy efforts calling for its removal,” said Bob Broeksmit, president of the Mortgage Bankers Association (MBA). “The proposed fee was unworkable for lenders and would have confused borrowers and undermined the customer experience.”

The cancellation of the fee was welcome news to the industry.

“We are pleased that our advocacy efforts on behalf of our 1.5 million members and their clients were successful,” states National Association of REALTORSÒ (NAR) President Kenny Parcel. “We applaud the FHFA for listening to the industry’s concerns by choosing to drop this fee on borrowers with higher debt-to-income ratios. It would have imposed a cost on borrowers at a time in the market when affordability is already stretched and only made them riskier.”

Overall, you no longer need to worry about that DTI fee thanks to great industry advocacy and initiative on the borrowers’ behalf. You are always our number one priority! 



Sources: National Association of REALTORSÒ, Scotsman Guide