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The Federal Housing Finance Agency (FHFA) did a policy about-face and rescinded its recently enacted upfront fees based on borrowers’ debt-to-income (DTI) ratios for home loans acquired by Fannie Mae and Freddie Mac.

The regulator announced in March it would delay implementation of these fees. The FHFA received criticism with the May 1 introduction of the loan level price adjustment (LLPA) fees, which was characterized by opponents of the new policy as penalizing borrowers with good credit and rewarding those with poorer credit.

“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 regulator also announced it would be issuing a new Request for Input (RFI) on the single-family guarantee fee pricing framework shortly.​

Mortgage Bankers Association President and CEO Robert D. Broeksmit welcomed the news from the FHFA, stating the “proposed fee was unworkable for lenders and would have confused borrowers and undermined the customer experience. We are pleased that FHFA engaged with industry stakeholders, recognized the negative impacts of the fee, and decided to rescind its implementation.”