In mid-January, the Federal Housing Finance Agency (FHFA)announced further changes to Fannie Mae’s and Freddie Mac’s (the Enterprises) single-family pricing framework by introducing redesigned and recalibrated upfront fee matrices for purchase, rate-term refinance, and cash-out refinance loans.
As the National Association of Realtors® (NAR) explained, Fannie Mae and Freddie Mac charge both a market-wide flat guarantee fee as well as upfront fees LLPAs that are tailored to credit scores and down payments for individual borrowers. The FHFA directed Fannie Mae and Freddie Mac to reduce the LLPAs in 2022 on homebuyers but raised them in high-cost markets.
These pricing changes broadly impact purchase and rate-term refinance loans and build on the upfront fee changes mentioned above that FHFA announced in January and October 2022. The new fee matrices consist of three base grids by loan purpose for purchase, rate-term refinance, and cash-out refinance loans—recalibrated to new credit score and loan-to-value ratio categories—along with associated loan attributes for each. The updated fees will take effect for deliveries and acquisitions beginning May 1, 2023, to minimize the potential for market or pipeline disruption.
Bob Broeksmit, the President and CEO of the Mortgage Bankers Association, commented on the pricing changes, “Our initial review indicates that the new framework results in a modest net increase in overall pricing, which is a concern given ongoing affordability challenges and the higher interest rate environment. With the peak homebuying season coinciding with these changes, FHFA should consider additional program changes to improve affordability, including raising the area median income threshold for the GSEs’ low down payment products. This move would expand eligibility for borrowers who can meet the monthly obligation of a mortgage payment but do not have significant savings to make a large down payment.”
Lauren Bunting is a Broker with Keller Williams Realty of Delmarva in Ocean City, Maryland.
