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The Federal Housing Finance Agency (FHFA) announced May 1, 2023 that they will be implementing a new loan level price adjustment (LLPA) for mortgages purchased or guaranteed by Fannie Mae and Freddie Mac. This means direct changes to mortgage pricing for high credit borrowers.
Under the new LLPA, high credit score borrowers will see an increase in their interest rate pricing. This means that borrowers with higher credit scores will have to pay more in interest charges compared to those with lower credit scores. The FHFA stated that this new LLPA is intended to offset the increased risk associated with lower credit score borrowers.
The borrowers negatively affected the most by this change are those who fall within the following:
Mid score between 720-779
Down payment between 5-29% of the purchase price
And the borrowers most positively affected by this change are those who fall within a 620-679 mid score.
It is important to note that this LLPA applies only to mortgages purchased or guaranteed by Fannie Mae and Freddie Mac. This may lead to more borrowers looking to FHA or Non-QM loans when they traditionally would stay the conventional route.
Additionally, the exact impact of this LLPA on borrowers will depend on the specific details of their mortgage application, including factors such as the loan amount, loan-to-value ratio, and other risk factors.
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