NAR to Congress: Rethink Mortgage Fees

NAR President Parcell told a U.S. House committee that first-time homebuyers need support – but new loan fees by FHFA are “another hurdle to owning a home.”

WASHINGTON – National Association of Realtors® (NAR) President Kenny Parcell testified before the U.S. House Committee on Financial Services Subcommittee on Housing and Insurance earlier this week. His talk focused on the Federal Housing Finance Agency’s (FHFA) new loan level pricing adjustments (LLPA) fee increase that impact borrowers with fair to good credit profiles.

FHFA has oversight of the secondary mortgage market, which includes Fannie Mae and Freddie Mac. The fees apply to any loan that a local lender plans to later sell to the secondary mortgage market.

Parcell told lawmakers that the fees are unnecessary and confusing – and potential homebuyers already face a number of hurdles, including a lack of affordability and supply of for-sale homes. The LLPA fee adds another hurdle to that list.

“The average American homebuyer faces more barriers to achieving homeownership than ever before,” he said. “Uncertainty in the U.S. economy, rising inflation, increasing mortgage rates and lack of affordable inventory continue to devastate buyer confidence.”

U.S. home homebuyer mortgage applications dropped to a 28-year-low as interest rates increased, Parcell said. “First-time homebuyers historically made up around 40% of the market but that has dropped to 26%, the lowest on record.”

Parcell wants as many Americans as possible to be homeowners because it’s “the best way to build wealth.”

Parcell told U.S. representatives that the biggest challenge for homebuyers today is unaffordability and the dearth of homes currently offered for sale.

“Without addressing this issue, housing will remain out of reach for many, he testified. “Possible solutions to supply include incentives to transfer commercial office buildings into residential units, mobilizing private funds to revitalize affordable homes, or incentivizing more owners to sell their homes by increasing the maximum amount of capital gains a homeowner can exclude on the sale of a principal residence.”

Parcell then praised an FHFA decision to rescind an LLPA fee slated to become effective in August. The proposed fee would have impacted borrowers with debt-to-income (DTI) ratios greater than 40%. FHFA has also issued a Request for Information (RFI) on its LLPA increase on borrowers with better credit, so it also appears to be considering other LLPA changes.

“This is a huge victory for consumers, as we opposed the DTI fee and believe public comment and further research from the industry, analysts and concerned consumers will help the FHFA reconsider the pricing changes in hopes of lowering fees on all borrowers,” he testified.

The congressional meeting to discuss LLPA fees including other real estate industry stakeholders, including representatives from the Housing Policy Council (HPC), the Robert H. Smith School of Business at the University of Maryland, and the Urban Institute’s Housing Finance Policy Center Urban Institute.

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