What Is New LLPA?

Did you know the New mortgage rules?LLPA, effective today (May 1, 2023)??

The fees increased for some borrowers with good credit as part of Biden's plan to make homeownership more accessible. Fannie Mae and Freddie Mac will charge higher fees for higher credit scores and down payments but lower fees for lower scores and down payments. The goal is to make homeownership achievable for all.

What is LLPA anyway? A loan-level pricing adjustment (LLPA) is?a risk-based fee assessed to mortgage borrowers using a conventional mortgage. Loan-level pricing adjustments vary by borrower based on loan traits such as loan-to-value (LTV), credit score, loan purpose, occupancy, and number of units in a home.

Example:?Before the rule change, a borrower with a credit score of 740 and a 15% down payment would have faced a 0.25% fee on their mortgage. After the change, that fee will rise to 1%. It's the opposite story for some borrowers with lower credit ratings: Someone with a score of 640 putting down 15% would have paid a 3.25% fee before. After the change, it will fall to 2.5%.?

The additional revenue aims to bolster the financial soundness of Fannie Mae and Freddie Mac, a bipartisan issue since the Great Recession.

Since entering conservatorship in 2008, [Fannie and Freddie] have remained undercapitalized and maintain a taxpayer backstop should they confront significant losses. As a result, the agency has been balancing a need to shore up Fannie and Freddie's finances with borrowers' desires. For instance, during the coronavirus pandemic, In another consideration, the FHFA also says it has yet to look at its basic upfront fee schedule for years.

You can see the entire new LLPA tables?on Fannie Mae's website. The old tables, which will no longer be used after May 1,?can be seen here.

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