The Federal Housing Finance Agency (FHFA) has announced changes to Fannie Mae and Freddie Mac's (the GSEs) guarantee fee pricing by eliminating upfront fees for certain borrowers and affordable mortgage products, while implementing targeted increases to the upfront fees for most cash-out refis.
As part of the pricing changes stemming from the FHFA's ongoing review of the GSEs' pricing framework announced last year, FHFA is eliminating upfront fees for:
- First-time homebuyers at or below 100% of the Area Median Income (AMI) in most of the nation, and below 120% of AMI in high-cost areas;
- HomeReady and Home Possible loans (Fannie Mae and Freddie Mac's affordable mortgage programs);
- HFA Advantage and HFA Preferred loans; and
- Single-family loans supporting the Duty to Serve program.
"FHFA is eliminating upfront fees for certain first-time homebuyers, low-income borrowers, and underserved communities to promote sustainable and equitable access to affordable housing," said Director Sandra L. Thompson. "Today's announcement will result in savings for approximately one in five borrowers of the Enterprises' recent mortgage acquisitions."
The new fee reductions will go into effect immediately, and the FHFA will work with the GSEs and announce an implementation date shortly. The implementation of new fees for cash-out refinance loans will begin February 1, 2023, in order to minimize market and pipeline disruption.
The pricing changes build upon the upfront fee increases for second home loans and high balance loans announced in January 2022 [1].
The FHFA classifies “high balance loans” as mortgages originated in certain designated areas above the baseline conforming loan limit. The FHFA’s new fees went into effect for deliveries and acquisitions beginning Friday, April 1, 2022, in order 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," added 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."
FHFA also plans to continue to review and update the pricing framework to meet the objectives set in the FHFA's 2022 Scorecard for Fannie Mae, Freddie Mac, and Common Securitization Solutions [2] for the Enterprises to support core mission borrowers, while fostering capital accumulation, achieving commercially viable returns, and ensuring a level playing field for all sellers.
“The announced updates on credit scoring models should help broaden the scope of eligible borrowers and expand access to homeownership for underserved communities," added Bob Broeksmit, CMB, President and CEO of the Mortgage Bankers Association (MBA) [3]. "MBA supports competition in the credit scoring space, and we will work with FHFA to ensure costs and the implementation process are monitored to mitigate unintended consequences to lenders and borrowers."