The Federal Housing Finance Agency (FHFA) has announced further changes to Fannie Mae’s and Freddie Mac’s single-family pricing framework by introducing redesigned and recalibrated upfront fee matrices for purchase, rate-term refinance, and cash-out refinance loans.
“These changes to upfront fees will strengthen the safety and soundness of the Enterprises by enhancing their ability to improve their capital position over time,” said FHFA Director Sandra L. Thompson [1]. “By locking in the upfront fee eliminations announced last October, FHFA is taking another step to ensure that the Enterprises advance their mission of facilitating equitable and sustainable access to homeownership.”
The priorities outlined in the 2022 and 2023 Scorecards for the GSEs include developing a pricing framework to maintain support for single-family purchase borrowers limited by wealth or income, while also ensuring a level playing field for large and small sellers, fostering capital accumulation, and achieving commercially viable returns on capital.
“FHFA’s holistic review of the GSEs’ up-front pricing framework has led to extensive reworking of the grids, and it will take some time to assess the full impact on borrowers and the market,” noted Robert D. Broeksmit, CMB, President and CEO of the Mortgage Bankers Association (MBA) [2]. “Our initial review indicates that the new framework results in a modest net increase in overall pricing, which is a concern given ongoing affordability challenges and the higher interest rate environment.”
The updated pricing changes broadly impact purchase and rate-term refinance loans, and build on upfront fee changes announced by FHFA in January and October 2022, which have been integrated into the new grids. The new fee matrices consist of three base grids by loan purpose for purchase, rate-term refinance, and cash-out refinance loans—recalibrated to new credit score and loan-to-value ratio categories—along with associated loan attributes for each.
“With the peak homebuying season coinciding with these changes, FHFA should consider additional program changes to improve affordability, including raising the area median income threshold for the GSEs’ low down payment products,” added Broeksmit. “This move would expand eligibility for borrowers who can meet the monthly obligation of a mortgage payment but do not have significant savings to make a large down payment.”
The updated fees will take effect for deliveries and acquisitions beginning May 1, 2023, to minimize the potential for market or pipeline disruption.
“Overall, FHFA’s review of upfront pricing in the conventional mortgage market will have a positive impact and result in savings and cost reductions for many low down payment borrowers served by private mortgage insurance,” said the U.S. Mortgage Insurers (USMI) in a statement. “USMI applauds FHFA and Director Thompson for taking a measured and prudent approach to identifying areas where upfront costs could be adjusted, and for many reduced, while maintaining a commitment to strong risk management.”