Costs will drop for many conventional loans after FHFA reduced “loan-level pricing adjustments” levied on most mortgages, a changed backed by NAR.
WASHINGTON – When applying for a mortgage, the rate a lender quotes a borrower isn’t always what they expect – or what they’ve read about in the media. Part of the costs rolled into the quote are “loan-level pricing adjustments,” and a move by the Federal Housing Finance Agency (FHFA) to lower those adjustments should make a loan more affordable for most U.S. home borrowers.
In March 2008 the FHFA’s mortgage-backing agencies, Fannie Mae and Freddie Mac, created loan-level pricing adjustments, which are additional fees based on “more than a dozen risk characteristics,” according to Dan Green writing in “The Mortgage Reports.” He cites a few examples that include:
- Mortgaging a home as an investment property
- Mortgaging a condo with less than 25% equity
- Mortgaging a multi-unit home
- Doing a cash-out refinance at any loan-to-value
- Subordinating a second mortgage via a piggyback loan
FHFA’s loan-level pricing adjustments will help most homebuyers.
The National Association of Realtors® (NAR) “applauds FHFA for reducing loan-level pricing adjustments for first-time homebuyers, low and moderate income buyers, and a broad swath of homebuyers,” says NAR President Leslie Rouda Smith. “NAR has long advocated for these reductions, but the benefit of reduced fees to homebuyers is even more important today as we confront the highest mortgage rates in almost two decades. Our members believe that this reduction reflects the strength of (Fannie Mae and Freddie Mac), and that supporting the housing market and taxpayers is their top priority.”
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