Announcement made by the Federal Housing Finance Agency (FHFA) regarding the Loan Level Price Adjustments (LLPA). FHFA was going to immediately increase the pricing on mortgage loans with a bit higher debt to income back end ratios. FHFA assumes that borrowers pushing the maximum income verses their total bills are more risky in this volatile market and will more likely have trouble repaying. March 2023.
The FHFA is the regulator for Fannie Mae and Freddie Mac, which are government-sponsored entities that provide funding for the mortgage market. As part of its role, the FHFA sets guidelines for the loans that Fannie Mae and Freddie Mac can purchase.
In August 2020, the FHFA announced that it would be implementing new Loan Level Price Adjustments (LLPA) for certain borrowers with debt-to-income (DTI) ratios above 45 percent. These adjustments would increase the cost of borrowing for these borrowers.
However, on March 10, 2023, the FHFA announced that it would delay the effective date of the LLPA for certain borrowers with DTI ratios between 40 and 45 percent. The delay would be for 90 days, until June 8, 2023.
The reason for the delay is to give the FHFA time to evaluate the impact of the LLPA on these borrowers and to determine whether any further adjustments need to be made. The FHFA has stated that it remains committed to ensuring that the mortgage market remains stable and that borrowers have access to affordable credit.
Summary:
Get your loan application in and locked before this price increase hits your deal.
