The Federal Housing Finance Agency (FHFA) is implementing targeted increases to Fannie Mae and Freddie Mac upfront fees for certain high-balance loans and second home loans.
High-balance loans are mortgages originated in certain designated areas above the baseline conforming loan limit. The new fees will go into effect for deliveries and acquisitions beginning April 1, 2022, in order to minimize market and pipeline disruption.
To ensure that the GSEs continue to provide strong support for affordable housing, the existing beneficial pricing treatment of certain programs – such as HomeReady, Home Possible, HFA Preferred and HFA Advantage – will not be altered by the new fees. In addition, loans to first-time homebuyers in high-cost areas with incomes at or below 100% of area median income will have no specific high balance upfront fees.
“These targeted pricing changes will allow the enterprises to better achieve their mission of facilitating equitable and sustainable access to homeownership, while improving their regulatory capital position over time,” says Acting Director Sandra L. Thompson. “This 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.”
In April, upfront fees for high balance loans will increase between 0.25% and 0.75%, tiered by loan-to-value ratio. Fannie Mae and Freddie Mac refer to these mortgages as high-balance loans and super conforming loans, respectively. For second home loans, upfront fees will increase between 1.125% and 3.875%, tiered by loan-to-value ratio.
FHFA set an objective in the 2022 Scorecard for Fannie Mae, Freddie Mac and Common Securitization Solutions for the enterprises to update the current pricing framework to increase support for core mission borrowers, while fostering capital accumulation, achieving viable returns, and ensuring a level playing field for small and large sellers.