FannieMae Loan Level Price Adjustments
A new set of Fannie Mae loan level price adjustments have hit the market for Conventional Loans. These move to further punish lower credit scores and greatly increase the cost of accessing equity through a cash out refinance. These adjustments are going to push even more borrowers into FHA as FHA becomes much cheaper than Conventional Loans in many LTV/Credit Score combinations.
Here are some of the new FNMA LLPAs that go into effect for loans put into mortgage backed securities after June 1st. This means loans originated around mid May will be effected.
680 - 719 Credit Score - 0.5% Charge For Loans Over 60% Loan To Value. This is the first time I have ever seen a cost for having a credit score in this range, but I think this just goes to show how crazy the market it right now. If you have a 719 score the cost of a $200,000 mortgage just went up by $1,000!
The most effected was obviously the <620 score category. If a borrower wants to take case out of the property at 85% of the current market value, the cost would be 5.75%! So on a $200,000 loan the cost is now $11,500 above normal mortgage fees.
The same borrower could go FHA and save this $11,500 since FHA does not have any type of Loan Level Price Adjustments. It will be interesting to see how non-FHA approved brokers respond to these changes. We are already getting a lot of inquiries about loan officer positions at my company since we are an FHA Direct Endorsement Lender.
You can view all of the LLPAs at Fannie Mae’s website here: FNMA Loan Level Price Adjustments