Mortgage lenders are breathing a sigh of relief after Fannie Mae and Freddie Mac’s federal regulator said Wednesday it’s backing down from plans to institute a new fee on mortgages aimed at riskier borrowers whose monthly payments might stretch their finances.

The Federal Housing Finance Agency (FHFA) said it’s rescinding an upfront fee based on borrowers’ debt-to-income (DTI) ratios that was scheduled to be implemented on Aug. 1, after lending industry groups like the Mortgage Bankers Association called it “unworkable.”

FHFA was already embroiled in a controversy over other changes it made to the pricing matrices for calculating upfront fees, known as loan level price adjustments (LLPAs), for mortgages slated to be sold to Fannie and Freddie.

Fee increases targeting some homebuyers making moderate down payments that took effect May 1 generated a backlash from critics who questioned whether the move was intended to subsidize fee waivers for first-time homebuyers of limited means.

The DTI-based fee, which would have applied to borrowers taking out mortgages with debt-to-income ratios exceeding 40 percent, was originally scheduled to be implemented on May 1 as well. But FHFA announced in March that it would delay that fee until after the spring homebuying season.

Now Fannie and Freddie’s regulator seems ready to walk away from the idea of a DTI-based fee altogether — but may explore other ways to accomplish the same goal, saying it plans to issue a Request for Input (RFI) on single-family guarantee fee pricing.

A borrower’s income and expenses can change several times throughout the loan application and underwriting process, especially in today’s labor market, which is shaped by the growth in self-employment, part-time employment, and ‘gig economy’ employment.

Imagine being a borrower who is quoted one rate when applying for a loan, then getting near closing and hearing from your lender that, due to a slightly slower month at work or a higher homeowner’s insurance premium, the cost of your loan will have to go up.

The DTI fee would be perceived by the consumer as the lender constantly moving the goalposts, jeopardizing the trust between borrowers and lenders.

The MBA is pleased that FHFA engaged with industry stakeholders, recognized the negative impacts of the fee, and decided to rescind its implementation.