How does the new Loan Level Pricing Adjustment effect my buyers?
A Loan level pricing adjustment (LLPAs) and their guidelines are set by the Federal Housing Financing Agency (FHFA).
The FHFA is a federal government agency that oversees the mortgage industry in the US. LLPA’s were instituted after the 2008 financial crisis to account for risk exposure associated with mortgage lending.
Starting May 1, FHFA set new guidelines for borrowers around pricing for mortgages. LLPA fees are typically based on factors such as the borrower’s credit score, loan-to-value ratio, and debt-to-income ratio. What does this mean? The less risk to the lender, the lower the fees and cost of the mortgage. The more risk, the more cost to the borrower. The NAR has heard realtor’s feedback on the change and is making their voices heard.
Critics have said the changes amount to a penalty for those who have maintained high credit scores. However, at a housing policy forum hosted by NAR in April, FHFA Director Sandra Thompson indicated that “there was no uniform targeting of a borrower with a higher LTV for a lower.”
What do you need to know about the new LLPA Guidelines?
- These changes to fees were already priced into any loan that is closing after 5/1/2023. If you have not received an updated quote and pre-approval in the last 30 days, you should contact your lender or broker.
- LLPAs are a small part of the overall costs of a mortgage loan. You need to work with a broker that will be transparent and up front on all costs, including LLPAs, interest rate, insurance, taxes and closing costs.
- If you would like to discuss this in detail, we can set up a call for your with our preferred mortgage partner, The Orlicki Group. The link to use to schedule appointments for your referrals is below. You can also click on the button to visit the scheduling page as well: https://calendly.com/oghello/blpcpac