What the New LLPA Changes Mean for You

Blog posted On May 05, 2023

There’s been a lot of talk recently about the changes to Loan Level Pricing Adjustments (LLPAs) from Fannie Mae and Freddie Mac. You may have heard that people with higher credit scores are being ‘punished’ with higher fees than those with lower credit scores. But before you start intentionally lowering your credit score, you might want to hear the FULL story about the changes.

What are LLPAs?

LLPAs are upfront mortgage fees based on factors like your credit score, loan-to-value (LTV) ratio, and more. Throughout the years, LLPAs have gone through several changes and variations. The most recent change has gotten a lot of heat.

LLPAs: What changed

Here’s a condensed overview of the changes:

  • Borrowers with lower credit scores are seeing improved costs
  • Borrowers with higher credit scores are seeing a slight increase in costs
  • HOWEVER, borrowers with higher scores will STILL PAY LESS

Overall, the changes DO NOT mean that people with higher credit scores are paying more than those with lower scores. They’re paying a little more than they were before, but still less than those with lower credit scores. It’s likely that you won’t notice any change at all because lenders have been preparing their pricing for months.

“There's no scenario where someone with lower credit will have a lower fee.”

Matthew Graham, COO of Mortgage News Daily


Benefits of the recent LLPA changes

  1. Borrowers with higher scores are still paying less
  2. More borrowers with higher debt and lower scores can qualify
  3. Homeownership is becoming more affordable for more people

Why did the government make this change?

Here’s a clip from FHFA’s statement via Director Sandra Thompson herself: “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.”?? It’s a fancy way of saying that Fannie and Freddie (and the government) are trying to make homeownership more affordable and accessible.

If you have any questions about the new fees and how they might affect you, let us know!


Sources: FHFA, Mortgage News Daily