The Federal Housing Finance Agency (FHFA) has issued a statement to address misinformation that has been circulating on social media platforms regarding loan-level pricing adjustments (LLPAs) for conventional mortgages. The FHFA states that borrowers with higher credit scores are not being charged higher fees to offset lower fees charged to borrowers with lower credit scores. The updated fees, which increase as credit scores decrease for any given level of down payment, do not represent pure decreases for high-risk borrowers or pure increases for low-risk borrowers.
In response to misinformation about the Federal Housing Finance Agency’s (FHFA) loan-level pricing adjustments (LLPA), Director Sandra Thompson clarified that the updated fees vary, with some being higher and others being lower. Borrowers with high credit scores or significant down payments may see their fees remain flat or even decrease. Thompson highlighted that the GSEs’ pricing structure, which was revised in 2021 and resulted in the removal of upfront fees for low-income first-time homebuyers, does not incentivize borrowers to make lower down payments to benefit from lower fees.
The mortgage industry has expressed its discontent despite the FHFA’s statement regarding the updated pricing framework, which was initially announced in January and has been largely incorporated by lenders in advance of the May 1 implementation deadline. As the FHFA has established new credit bands for borrowers at the highest tiers, borrowers with FICO scores between 720-739 and 740-759 may, in many cases, experience higher LLPA fees—sometimes amounting to thousands of dollars. Those seeking cash-out refinances will be the most adversely affected, with most having to pay thousands of extra fees depending on their mortgage’s size.
The Mortgage Bankers Association (MBA) has expressed concerns that the mortgage industry is still adjusting to recent changes, including LLPAs increases on some high-balance loans and second homes, as well as waivers for high LTV programs and first-time homebuyers. However, the most controversial change is the LLPA associated with a borrower’s debt-to-income ratio (DTI). Borrowers with a DTI of 40% or higher will be charged a fee that the MBA has deemed “unworkable” and should be removed. Although the FHFA has delayed the implementation of this change until August and stated that the upfront fees won’t apply to loans purchased by GSEs this year, the agency has not completely eliminated the DTI LLPA. Thompson did not address the DTI component in her statement.