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REALTORS, industry partners voice concerns about proposed home lending fee hikes

REALTORS, industry partners voice concerns about proposed home lending fee hikes

May 22, 2023

By Andrew Huffman, Ohio REALTORS Director of Government Affairs

Ohio REALTORS, joined by four of the state's leading banking and finance associations, voiced strong support to the Ohio Senate for passage of Senate Resolution 115 which calls upon President Joe Biden to direct the Federal Housing Finance Agency (FHFA) to rescind its new loan level pricing adjustments that would raise fees on certain home buyers. 

In early May, FHFA announced the rescission of its proposed fee on borrowers with debt-to-income ratios greater than 40%. That fee, which was originally announced in January, had been delayed from May 1 to Aug. 1, but will no longer be implemented. FHFA announced it is seeking additional input on its other proposal, to increase fees on borrowers with credit scores over 680 and down payments from 5% to 25%.

REALTORS, both nationally and in Ohio, have expressed opposition to the controversial changes proposed by FHFA, noting they would increase fees on homebuyers during a time when mortgage rates are already spiking.

"This group (of potentially affected consumers) represents a significant segment of borrowers and embodies many middle-class Americans," said Scott Williams, Chief Executive Officer of Ohio REALTORS, in separate testimony submitted to the Ohio Senate Financial Institutions and Technology Committee in support of SR 115. "This fee increase will only magnify the affordability issues plaguing homebuyers in Ohio."

The following is the joint letter submitted by the Community Bankers Association of Ohio, Ohio Bankers League, Ohio Credit Union League, Ohio Mortgage Bankers Association and Ohio REALTORS on May 19 to Sen. Steve Wilson, Chair of the Senate Financial Institutions & Technology Committee:

On behalf of our members and the Ohio mortgage lending community, we write to you in support of Senate Resolution 115. This resolution urges the President of the United States to rescind the Federal Housing Finance Agency’s new loan-level price adjustments (LLPAs) for purchase, rate-term refinance, and cash- out refinance loans. While we support the intent of the LLPA changes, aimed at helping first-time homebuyers and those with low or moderate incomes to achieve homeownership, we believe there are far too many unintended consequences of the changes the FHFA has made that outweigh the benefits.

The proposed LLPA changes may subsidize homeownership costs for some, but they come at the expense of other borrowers who have worked hard to build good credit and save for a down payment. This plan would disregard the historically prudent usage of credit scores as a financial assessment tool and lead to increased costs for many borrowers through no fault of their own. Moreover, this could frustrate borrowers with higher credit scores and cause confusion on the importance of strong creditworthiness.

The proposed LLPA draws attention to the need for innovative and modern credit score calculations and analysis when it comes to Enterprise lending. Instead of shifting pricing, we urge the FHFA to focus on the credit reporting agencies to ensure that all activities demonstrating an individual's creditworthiness are considered. For instance, on-time and consistent rent and utility payments show an individual's financial responsibility. If those payments were considered in credit scores, lenders and Enterprises could correctly assess the fees and rates for the borrower's risk, without arbitrarily punishing well-qualified borrowers.

In addition, the Federal Reserve's breakneck pace of interest rate increases has already raised the costs of home buying, and the unintended consequences of the LLPA changes will result in even pricier monthly mortgage payments for many homebuyers. These changes could further complicate an already stressed mortgage marketplace and add undue pressure to borrowers in the pipeline. Our organizations believe now is not the right time to enact these changes and urges you to support SR 115’s call upon the President to rescind the FHFA’s proposed LLPA changes.

For these reasons, we urge your support of SR 115.

The National Association of REALTORS has vowed to work with FHFA to address the industry's concerns with the fee hike for borrowers with higher credit scores or larger downpayment requirements.

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