Comment Detail

Comment

The FHFA highlighted that with the LLPA changes "the average borrower's mortgage rate would increase by about 0.04 percentage point, or $10 a month". Since then, the DTI ratio-based upfront fee was rescinded (0.25% for LTV 60%-75%; 0.375% for LTV >75%, in borrowers with DTI ratio > 40%. Between 7 and 10 bps annually)
FHFA has failed to provide an update of the effect of the LLPA changes with this new development, that could harm the enterprises with a reduction of the average guarantee fee they charge on new acquisitions from 59 bps today (considered a fully private sector g-fee), to up to 53 bps.
Whatever the changes in the LLPA are, it's required, at least, to be revenue neutral. The complaint by industry stakeholders about operational challenges arising from a DTI ratio-based fee, is groundless. The DTI ratio is the main variable that a mortgage lender must assess with regard to the creditworthiness of the borrower, as it determines the likelihood of the borrower to experience financial hardship at some point and we know how costly the loan modification programs are in FnF (something that Senator Tim Scott isn't aware of, in his recent letter addressed to the FHFA director)
DTI ratio isn't captured in the credit score metric.
So, at least half of the previously proposed DTI ratio-based fee must be back on.