The Federal Housing Finance Agency (FHFA) “as soon as possible” will eliminate upfront fees for certain borrowers and affordable mortgage products, which is part of an ongoing review of Fannie Mae and Freddie Mac’s guarantee fee pricing framework initiated in 2021.
The agency will also implement targeted increases to the upfront fees for most cash-out refinance loans, beginning February 1, 2033, to “minimize market and pipeline disruption,” according to an announcement on Monday.
The FHFA will eliminate upfront fees for first-time homebuyers at or below 100% of area median income in most of the United States and below 120% of AMI in high-cost areas.
As part of its review of g-fees, the FHFA is eliminating upfront fees for agencies’ affordable mortgage programs, HomeReady and Home Possible; HFA Advantage and HFA Preferred loans; single-family loans supporting the Duty to Serve program.
The agency will work with Fannie Mae and Freddie Mac to announce an implementation date shortly.
The measure impacts mainly low-income borrowers and underserved communities, according to FHFA’s director Sandra Thompson, who made the announcement Monday at MBA Annual in Nashville.
“Today’s announcement will result in savings for approximately 1 in 5 borrowers of the enterprises’ recent mortgage acquisitions,” she said in a statement.
The FHFA formally signaled its intent to update the GSEs’ pricing framework in its 2022 Scorecard for Fannie Mae, Freddie Mac, and their jointly owned securitization platform, Common Securitization Solutions.
The agency directed the regulated entities 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.
Earlier this year, the FHFA increased upfront fees between 0.25% and 0.75% for high-balance loans, tiered by loan-to-value ratio, effective April 1, 2022. For second home loans, the upfront fees increased between 1.125% and 3.875%, also tiered by the loan-to-value ratio.
Since then, the elimination of upfront fees for some borrowers has been expected by industry experts. Mortgage Bankers Association’s (MBA) President Bob Broeksmit said at that time that the announcement set the stage for reducing loan-level price adjustments for first-time borrowers and those facing higher fees due to the loan-to-value ratio or their credit score.
“To the degree, they recognize better margins on these loans, we would expect that cross-subsidy would flow to mission-centric borrowers,” said Broeksmit.
Appraisal bias
FHFA also announced a new Uniform Appraisal Dataset (UAD) Aggregate Statistics Data file, with user-friendly visualization on its website, to develop a more efficient valuation system to reduce appraisal bias.
“As home valuations are a vital component of the mortgage process, publishing transparent, aggregate data on appraisals provides useful information to the public while protecting borrowers’ personally identifiable information,” said Thompson.
FHFA’s Division of Research and Statistics used 47.3 million UAD appraisal records collected from 2013 through the second quarter of 2022 on single-family properties to create a data file of UAD aggregate statistics that protects borrower privacy.