Skip to main content

The Housing Market Is In trouble

Can increasing the LLPAs on Second Homes and Jumbos help?

The Housing Market Is In Trouble
Contributing Writer

We are in the process of hiring a new director for our company. He will be moving to Utah from out of state. With his six-figure salary he qualified for more than half a million-dollar loan.

Four years ago, I bought a 4,600-square-foot house on a full acre within 10 minutes of our office within his price range. When I asked what he was finding, he told me he was driven 45 minutes away to look at townhomes or 2,000-square-foot homes that were more than 50 years old on less than a quarter of an acre that needed major renovations. To say he looked miserable after his weekend of house hunting would be an understatement.

What can be done to help the situation? According to Fannie Mae and Freddie Mac, an increase on high balance loans of between 0.25% and 0.75% and a similar increase on second homes of between 1.125% and 3.875% will help to ensure that they will have the funds to better help lower-income home buyers.

housing market table

On Jan. 5, 2022, Fannie Mae and Freddie Mac jointly announced their loan-level price adjustments (LLPA) for high-balance and second home loans. Unlike their March 2021 announcement for non-owner-occupied increases, they are giving lenders time to prepare to make the changes. However, as this change could result in tens of thousands of additional dollars for high-balance loans, you will likely see it appear on your pricing before the April 1 deadline.

In the press release announcing the change FNMA Acting Director Sandra L. Thompson stated the purpose of the increase would help facilitate “equitable and sustainable access to homeownership” while also increasing the GSEs' regulatory capital position.

According to Thompson “[The] 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.”

By increasing the LLPAs on high-balance and second homes, it will provide the GSEs' with a stable base that allows them to offer additional programs to help first-time or lower-income homebuyers.

Before the change, the LLPA’s on second homes were between 0–.25%. By comparison, if someone were to put 15% down and take out a $500,000 loan, the new LLPA would result in $20,625 more for the GSEs.

When considered alongside last year’s similar increase on investment properties, it is easier to see that the government is working to do its part to build up reserves so that it will be able to help with the housing issue by opening up lending for those who need it most.

This article was originally published in the Mortgage Women Magazine February 2022 issue.
About the author
Contributing Writer
Tyna-Minet Anderson is vice president of Mortgage Educators and Compliance.
Published on
Feb 10, 2022
One Star’s Rise In The Mortgage Sky

Kristen Eklund found success by focusing on transient mortgage market

Erica Drzewiecki
The Fragile World Of Inclusion

The legal assault on inclusion and its ripple effects could soon intrude on DEI initiatives in the mortgage industry

Sarah Wolak
The Pitfalls Of Perfection

Women and self-imposed pressures in the mortgage industry

Katie Jensen
Surviving The Slump

How to keep staff engaged in a down market

Jack Dunn
New Compliance Requirements Add Challenges

Latest changes arrive at an already disruptive time in the mortgage industry

Natalie Henderson
Thrive With A Focus On Consumer Experience

Today’s borrowers expect a simple, fast, and convenient online process

Michele Bodda


OriginatorTech Deep Dive: CreditXpert

What is OriginatorTech Deep Dive? This is a collaborative demo where you and other mortgage professionals w...

Apr 23, 2024
Investor Confidence in Today’s Non-QM And Why Originators Are Paying Attention... A Virtual Town Hall

We host Angel Oak Mortgage Solutions for a special 2021 edition of their virtual town hall series they ran fro...

Apr 08, 2021
How to Help Real Estate Pros in a Post-Refi World

Hear from Melissa Merriman, REALTOR® with The Melissa Merriman Team at Keller Williams, on what real estate pr...

Mar 18, 2021
Connect with your local mortgage community.

Meet your your colleagues, both national and local, by attending an event in your area.