The mortgage industry largely supports changes to the loan-level price adjustment (LLPA) matrix but remains divided on priorities, with a full overhaul unlikely amid a potential stock offering of Фанни Мэй и Фредди Мак.
Two weeks ago, Федеральное агентство жилищного финансирования (ФХФА) Director Bill Pulte said he had tasked Barry Habib - MBS Highway founder and CEO and a Фанни Мэй board member since July — to work on a proposal. That blueprint focuses on non–owner-occupied second homes and cash-out refinances, ЖильеПроволока сообщил во вторник.
At this point, nothing has been established, Habib said in an interview. Meanwhile, Pulte has opened the discussion to other industry professionals.
Introduced in 2008, LLPAs compensate the government-sponsored enterprises (GSEs) for differences in borrowers’ credit risk, including factors such as loan-to-value (LTV) ratio and credit score. Before that, the GSEs charged a flat guarantee fee that did not vary by borrower risk factors.
LLPAs can be paid upfront or built into the interest rate. But with ставки по ипотечным кредитам already high, there’s often little or no room to absorb them, forcing borrowers to pay out of pocket. And that can derail transactions.
But reducing the fees could affect GSE revenues. The Американский институт предпринимательства оценки that from 2014 to 2022, Fannie and Freddie collected roughly $119 billion from upfront LLPAs, averaging about $13 billion per year. Lowering them might spur volume but could hurt margins, especially as the Trump administration plans a размещение акций for the GSEs.
“One of the core dilemmas in GSE reform is the conflict between their congressionally mandated mission and the financial imperative to generate a sufficient return on equity (ROE) to entice private capital to replace the taxpayer guarantee,” said Исаак Болтанский, head of policy at Pennymac.
Reversing recent changes
Over the years, LLPAs have been adjusted several times, sparking debate about whether they should promote affordability or purely reflect risk.
Под администрация Байдена, some LLPA changes increased pricing for certain loans. A proposed fee tied to a borrower’s debt-to-income ratio above 40% was later withdrawn after backlash from state officials and industry groups.
Скотт Олсон, исполнительный директор Кредиторы общественного жилья Америки (CHLA), said that any change to LLPAs should target areas where the fees make the biggest impact, particularly entry-level home purchases.
CHLA supports eliminating the 75-basis-point fee for condominiums, the 50-bps fee on сборный дом loans and LLPAs on high-balance loans.
Olson added that the CHLA was “not happy” with the increases on инвестиционная недвижимость and second homes during the Biden administration, a decision made “not based on risk but on the intent to get Fannie and Freddie to do fewer of these loans.”
But there’s an доступность component to these two areas as investment properties often provide affordable rental housing, while second homes play key roles in many local economies, including coastal areas, he added.
Boltansky agreed that reversing some Biden-era changes could make the pricing grid more reflective of actual risk. But he cautioned against lowering fees for investment properties, second homes and cash-out refis.
“These segments already benefit from a deep and robust private-label securitization market capable of attracting sophisticated capital,” Boltansky said. “Cutting LLPAs on these loans would actively displace private liquidity, unnecessarily expanding the government footprint into a sector that is already functioning efficiently and without taxpayer backing.”
Будьте проще
Боб Брэксмит, президент и генеральный директор Ассоциация ипотечных банкиров (MBA), said that if the focus is to cut LLPAs where it matters the most, the relief should target rate-and-term refinances and across-the-board cuts on purchase loans.
“For a rate-and-term refi where the borrower has a timely payment history — let’s say, for the last 12 or 18 months — and they’re рефинансирование to lower their payment, they’ve already proven their creditworthiness at the higher payment amount,” Broeksmit explained. “That LLPA could be removed, which would increase the benefit to the borrower.”
Broeksmit said the focus on the rate-and-term refi is due to the fact that with cash-out options, “the risk to the GSE is higher than they currently have on their books” because they involve larger loan amounts and higher LTV ratios.
“On the purchase side, the most immediate way and easiest to implement a change would be an across-the-board reduction,” Broeksmit said. “I don’t know what magnitude; we’ll leave that to the FHFA and the GSEs.”
According to Broeksmit, simple and broad-based adjustments can have a fast and positive effect on affordability. But an in-depth, nuanced change is more complicated to implement and could have a varying effect on borrowers, depending on where they are in the risk spectrum.
Should risk be the focus?
Mortgage brokers also want relief for second homes and high-balance loans — those above the baseline conforming limit but still eligible for GSE purchase in high-cost areas.
“If we see an improvement there, we’d be able to compete in that space like we did before,” said Брендан Маккей, главный специалист по вопросам адвокатуры в Коалиция действий брокера (BAC). “It’s my hope that those changes do not come at the cost of pricing for first-time homebuyer products or underserved communities.”
McKay said that since Biden administration’s changes, rates for second homes have been about 50 to 75 basis points higher, while high-balance loans also carry rates up to three-quarters of a point higher than standard GSE products.
McKay supports risk-based pricing, but he said it shouldn’t be the sole consideration.
“Fannie and Freddie are incredibly прибыльный,” he said. “If they continue to behave in an intelligent, risk-based fashion while also helping improve housing in this country, that’s a great thing.”
English