The Federal Housing Finance Agency (FHFA) on Thursday announced additional changes to the single-family pricing framework for Fannie Mae and Freddie Mac by introducing redesigned and recalibrated upfront fee matrices for purchase, rate-term refinance, and cash-out refinance loans.
The nation’s largest banker association issued a statement saying further review of the changes and their impact is warranted.
FHFA Director Sandra L. Thompson said the changes will strengthen the “safety and soundness” of the government-sponsored enterprises (GSEs) — Fannie Mae and Freddie Mac — by “enhancing their ability to improve their capital position over time.”
“By locking in the upfront fee eliminations announced last October, FHFA is taking another step to ensure that the (GSEs) advance their mission of facilitating equitable and sustainable access to homeownership,” Thompson said.
Purchase, Some Refi Loans Affected
The priorities outlined in the 2022 & 2023 Scorecards for the Enterprises include developing a pricing framework to maintain support for single-family purchase borrowers who are limited by wealth or income, while also ensuring a level playing field for large and small sellers, fostering capital accumulation, and achieving commercially viable returns on capital, the FHFA said.
The latest announced pricing changes broadly impact purchase and rate-term refinance loans, and build on upfront fee changes previously announced by FHFA in January and October 2022; those changes have already been integrated into the new grids.
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 (LTV) ratio categories — along with associated loan attributes for each, the agency said.
According to Fannie Mae’s price adjustment matrix, the following guidelines were used for the loan-level price adjustments (LLPAs):
- All LLPAs are calculated based on the acquisition date principal balance and are cumulative. The LLPAs apply to all loans that meet the stated criteria for the LLPA, unless otherwise noted or excluded.
- LLPAs are based on the gross LTV ratio, with the exception of minimum mortgage insurance LLPAs, which are based on the base (or net) LTV ratio.
- Credit score requirements are based on the “representative” credit score for the mortgage loan as defined in the Selling Guide. Loans delivered without any credit score will be charged under the lowest credit score range shown in each of the applicable LLPA tables. Loans delivered with more than one borrower, when one borrower has a credit score and one or more borrowers do not have credit scores, are charged according to the representative credit score (disregarding the borrower(s) without a credit score).
- All applicable LLPAs for MBS transactions are calculated on the MBS pool issue date based on the pool issue date balance, and will be drafted from the lender’s account designated for that purpose. All applicable LLPAs for whole loan transactions are calculated on the “Purchase Ready” date (as reflected in Loan Delivery) based on the unpaid principal balance of the loan and will be deducted from the loan net proceeds
The updated fees take effect for deliveries and acquisitions beginning May 1, 2023, to minimize the potential for market or pipeline disruption, FHFA said.
MBA Raises Concerns
The Mortgage Bankers Association (MBA) said Thursday it has concerns about the update.
“FHFA’s holistic review of the GSEs’ up-front pricing framework has led to extensive reworking of the grids, and it will take some time to assess the full impact on borrowers and the market,” said Bob Broeksmit, MBA president & CEO. “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.”
Broeksmit said that, because the peak homebuying season coincides with the start date for the 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.”
The MBA also urged FHFA to be “flexible” with its May 1 start date, to allow the industry more time to integrate the updates and recalibrate the upfront fee matrix into mortgage pricing.
“MBA will continue to work with FHFA, the GSEs, and the Biden administration and advocate for policies and actions that expand homeownership opportunities for all qualified borrowers,” Broeksmit said.
