The Federal Housing Finance Agency (FHFA) has announced targeted increases to Fannie Mae and Freddie Mac's upfront fees for certain high balance loans and second home loans.
The FHFA classifies “high balance loans” as mortgages originated in certain designated areas above the baseline conforming loan limit. The FHFA’s new fees will go into effect for deliveries and acquisitions beginning Friday, April 1, 2022, to minimize market and pipeline disruption.
"These targeted pricing changes will allow the Enterprises [Fannie Mae and Freddie Mac] to better achieve their mission of facilitating equitable and sustainable access to homeownership, while improving their regulatory capital position over time," said FHFA Acting Director Sandra L. Thompson. "Today’s action represents another step FHFA is taking to strengthen the Enterprises' safety and soundness and to ensure access to credit for first-time home buyers and low- and moderate-income borrowers."
The FHFA has ensured that the GSEs will continue to support affordable housing initiatives, as the existing beneficial pricing treatment of certain programs–such as HomeReady, Home Possible, HFA Preferred, and HFA Advantage–will not be impacted by these new fees.
In addition, loans to first-time home buyers in high-cost areas with incomes at or below 100% of area median income (AMI) will have no specific high-balance upfront fees.
As proposed by the FHFA, in April, upfront fees for high-balance loans will increase between 0.25% and 0.75%, tiered by loan-to-value ratio (LTV). The GSEs classify these mortgages as high-balance loans and super conforming loans, respectively. For second home loans, upfront fees will increase between 1.125% and 3.875%, again, tiered by LTV ratio.
Late last year, the FHFA set the nation’s conforming loan limits (CLLs) for mortgages to be acquired by the GSEs in 2022 as $647,200 for one-unit properties, an increase of $98,950 from $548,250 in 2021.
The FHFA set forth objectives in its 2022 Scorecard for Fannie Mae, Freddie Mac, and Common Securitization Solutions for the Enterprises to update the current pricing framework to increase support for core mission borrowers, while fostering capital accumulation, achieving returns, and ensuring a level playing field for small and large sellers.