FHFA increases fees for high balance loans and second home loans

the Federal Housing Finance Agency on Wednesday introduced new upfront fees for certain high balance loans and second homes sold at Fannie mae and Freddie Mac.

The initial charge for high balance loans will increase between 0.25% and 0.75%, scaled against loan-to-value. For second home loans, the initial charge will increase between 1.125% and 3.875%, also scaled by the loan-to-value ratio.

The new pricing framework will come into effect on April 1, 2022 to “minimize disruption to the market and pipelines,” the agency said in a press release.

Loans in certain affordable programs, including HomeReady, Home Possible, HFA Preferred, and HFA Advantage, will not be subject to the new fees. First-time buyers in high-cost areas with incomes below 100% of the area’s median income will also be exempt from the new high-balance upfront fees, although only a small number of these borrowers seek a second home and high balance loans.

In a statement, FHFA Acting Director Sandra Thompson said fee increases are another step the FHFA is taking to both strengthen the safety and soundness of government-sponsored businesses and ensure the access to credit for first-time home buyers and low- and moderate-income borrowers. .

“These targeted price changes will allow businesses to better accomplish their mission of facilitating fair and sustainable access to homeownership, while improving their regulatory capital over time,” said Thompson.

While the new fees on second homes and second homes will work the same as the now suspended limits for investors and second homes, mortgage industry stakeholders have welcomed Thompson’s move.

Mortgage Bankers Association Chairman Bob Broeksmit said he appreciated the new fee delivery date being April, which gives lenders more than 90 days to adjust their rate sheets appropriately.

He also said he expects this announcement will not be the last word on price adjustments, and that it will pave the way for reducing loan-level price adjustments for borrowers for the same period. first time and those facing higher fees because of the loan-to-value ratio or their credit rating.

“To the extent that they recognize better margins on these loans, we would expect the cross-subsidies to go to mission-focused borrowers,” Broeksmit said.

In an October interview with National Housing Conference President David Dworkin, Thompson said carrying out a broader GSE pricing review was on his “to-do list.”

“One of the things we committed to doing was looking at pricing, we didn’t do a holistic review of Fannie and Freddie’s price analysis, overhead and everything that includes the costs. overhead and pricing for business loans, ”says Thompson.

The FHFA has also officially signaled its intention to update the GSE pricing framework in its 2022 dashboard for Fannie mae, Freddie mac, and their jointly owned securitization platform, Common securitization solutions. The regulator ordered regulated entities “to increase support for core mission borrowers, while promoting capital accumulation, achieving sustainable returns and ensuring a level playing field for small and large sellers” .

During her tenure as Interim Director of the FHFA, Thompson made affordability a top priority. In August, the FHFA proposed new accessibility criteria for GSEs, setting targets for purchasing loans in low-income and minority communities, and dramatically increasing the target for refinancing low-income people.

These actions have garnered praise from the affordable housing community. But some of the same groups have also argued that there is still a lot of room for improvement. In October, a coalition of twenty affordable housing groups called on the regulator to reject the duty to serve GSE plans proposed in May for 2022 to 2024.

Affordable housing groups said the plans did not meet “the letter or the letter” of the regulation because the plans would eliminate pre-fab loan purchase programs labeled as personal property. The plans would also reduce lending targets for prefabricated housing, preservation of affordable housing, and rural housing.

Some also questioned whether the FHFA’s decision to support mortgages of nearly $ 1 million was in line with the mission of GSEs and asked for more clarity on the role of government in the housing finance system.

“Whether taxpayer support for million dollar mortgages is in line with the GSE charter is an issue that lawmakers and policymakers should address,” said Ed DeMarco, chairman of the GSE. Housing Policy Council and acting director of the FHFA from 2009 to 2014, in a December interview with HousingWire.

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