Mortgage Minute

by Michael Scharfe

You may have recently heard some information on the news about Fannie Mae and Freddie Mac making changes to their Loan Level Pricing Adjustments (LLPAs). Both Fannie and Freddie have always had pricing adjustments that impact your loan, depending on your credit score, down payment, type of home, and more. These new adjustments were put into effect as of May 1, 2023, to provide “equitable and sustainable access to homeownership.” Individuals with top credit scores will still pay less than those with lower credit scores. However, those with lower credit scores won’t get penalized as much as they have in the past. For example, someone with a top tier credit may have had a LLPA of .25% on their loan prior to May 1, whereas now the LLPA could now be at .375%. Those with lower credit scores may have had a LLPA of 2.75% prior to May 1, now they could have a lower LLPA of 1.50%.

On the surface these changes may seem to be penalizing those with good credit to give those with lower credit scores a better deal. However, individuals with good credit are still getting the better deal. These changes are being put into effect to help those with lower credit scores obtain financing, where they may have not been able to before. The individuals that are most likely to experience the effect of these changes are typically going to be first time home buyers that fall into the low-to-moderate income category.

While affordability has been an on-going concern with housing, the hope is that these changes will help bridge the gap to create more home ownership opportunities.

For more on these changes please see the article from USA Today,

https://www.usatoday.com/story/money/personalfinance/2023/04/23/mortgage-fee-structure-change -may-2023/11713841002/.

Michael Scharfe has been a lender at First Security Bank for nine years. Reach him at [email protected].