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FHFA Announces Upfront Fees For High Balance And Second Home Loans

Katie Jensen
Jan 05, 2022

In April, the new fees will go into effect for deliveries and acquisitions to minimize market and pipeline disruption. 

KEY TAKEAWAYS
  • The FHFA announced targeted increases to Fannie Mae and Freddie Mac’s (the Enterprises) upfront fees for certain high balance loans and second home loans.
  • Beginning April 1, 2022, the new fees will go into effect for deliveries and acquisitions to minimize market and pipeline disruption. 
  • In April, upfront fees for high balance loans will increase between 0.25% and 0.75%, tiered by loan-to-value ratio.
  • For second home loans, upfront fees will increase between 1.125% and 3.875%, tiered by loan-to-value ratio.

Today, the Federal Housing Finance Agency (FHFA) announced targeted increases to Fannie Mae and Freddie Mac’s (the Enterprises) upfront fees for certain high balance loans and second home loans.

High balance loans are mortgages originated in designated areas above the baseline conforming loan limit. Beginning April 1, 2022, the new fees will go into effect for deliveries and acquisitions to minimize market and pipeline disruption. 

In April, upfront fees for high balance loans will increase between 0.25% and 0.75%, tiered by loan-to-value ratio. Fannie Mae and Freddie Mac refer to these high balance loans and super conforming loans, respectively. For second home loans, upfront fees will increase between 1.125% and 3.875%, tiered by loan-to-value ratio.

To ensure and support the availability of affordable housing, the new fees will not apply to certain programs such as HomeReady, Home Possible, HFA Preferred, and HFA Advantage. Also, loans to first-time-buyers in high cost areas with incomes at or below 100% of area median income will have no specific high balance upfront fees. 

"These targeted pricing changes will allow the Enterprises to better achieve their mission of facilitating equitable and sustainable access to homeownership, while improving their regulatory capital position over time," said FHFA Acting Director Sandra L. Thompson. "Today’s action represents another step FHFA is taking to strengthen the Enterprises' safety and soundness and to ensure access to credit for first-time home buyers and low- and moderate-income borrowers."

Additionally, the FHFA set an objective in the 2022 Scorecard for Fannie Mae and Freddie Mac and Common Securitization Solutions to update the current pricing framework in order to “increase support for core mission borrowers, while fostering capital accumulation, achieving viable returns and ensuring a level playing field for small and large sellers.”

Update 1/05/22: The Structured Finance Association (SFA) today released the following statement: “This is the right move on FHFA’s part, as guaranteeing $1 million homes is a far cry from the core mission of Fannie Mae and Freddie Mac,” said Michael Bright, CEO of the Structured Finance Association. “We have seen the private-label securities market meet demand, and the private market can provide credit to borrowers affected by this change. In fact, SFA research has demonstrated the capacity of the private-label securities market to efficiently backfill markets outside of the GSEs’ core mission. We appreciate Acting Director Thompson’s strong commitment to sensible housing policies and continue to urge the Senate to confirm her nomination.”

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