Home Equity Lending News

Fannie Mae Raises LLPAs for Subordinate Financing

The cost of financing a Fannie Mae first mortgage where subordinate financing is present is being raised.

The secondary mortgage giant has released an updated Loan-Level Price Adjustment Matrix. In addition to changes in the layout, individual LLPAs have been adjusted both up and down.

An announcement yesterday from Fannie’s regulator and conservator, the Federal Housing Finance Agency, indicated that changes have been made to both Fannie’s and Freddie Mac’s single-family pricing framework.

“These changes to upfront fees will strengthen the safety and soundness of the enterprises by enhancing their ability to improve their capital position over time,” FHFA Director Sandra L. Thompson said in the announcement.

Among the changes to Fannie’s layout are individual pricing matrices for home purchase financing, rate-term refinances, and cash-out refinances.

On Fannie’s new purchase-money matrix, the LLPA for a loan with subordinate financing and a loan-to-value ratio of 30 percent or less is 0.65 percent. On the old matrix, the LLPA ranged between 0.25 percent and 0.50 percent, depending on the credit score, for an LTV ratio of up to 65 percent.

Subordinate financing on a mortgage with an LTV ratio in excess of 95 percent would generate a 1.875 percent LLPA under the new pricing. On the old matrix, the pricing adjustment was 1.50 percent.

Fannie noted that subordinate financing LLPAs will be charged if the combined LTV ratio is greater that the LTV ratio for just the first mortgage. This will favorably impact home-equity lines of credit that have not been drawn on.

The LLPA doesn’t apply if subordinate financing is a Community Seconds loan.

Impacted loans are those delivered into mortgage-backed securities with issue dates on or after May 1.

View the new matrix.