FHFA Eliminates Upfront Fees for First-Time Homebuyers
Real Estate In-Depth | October 25, 2022
WASHINGTON—The Federal Housing Finance Agency announced on Oct. 24 targeted changes to Fannie Mae’s and Freddie Mac’s guarantee fee pricing by eliminating upfront fees for certain borrowers, including first-time homebuyers, and affordable mortgage products, while implementing targeted increases to the upfront fees for most cash-out refinance loans.
As part of the pricing changes stemming from the agency’s ongoing review of the Enterprises’ pricing framework announced last year, FHFA is eliminating upfront fees for:
• First-time homebuyers at or below 100% of area median income (AMI) in most of the United States and below 120% of AMI in high-cost areas;
• HomeReady and Home Possible loans (Fannie Mae and Freddie Mac’s flagship affordable mortgage programs);
• HFA Advantage and HFA Preferred loans; and
• Single-family loans supporting the Duty to Serve program.
“FHFA is eliminating upfront fees for certain first-time homebuyers, low-income borrowers, and underserved communities to promote sustainable and equitable access to affordable housing,” said FHFA Director Sandra L. Thompson. “Today’s announcement will result in savings for approximately one in five borrowers of the Enterprises’ recent mortgage acquisitions.”
The new fee reductions will go into effect as soon as possible. FHFA will work with the Enterprises and announce an implementation date shortly. The implementation of new fees for cash-out refinance loans will begin Feb. 1, 2023, in order to minimize market and pipeline disruption.
Today’s pricing changes build upon the upfront fee increases for second home loans and high balance loans announced earlier this year. FHFA officials stated that the agency will continue to review and update the pricing framework to meet the objectives set in the 2022 Scorecard to support core mission borrowers, while fostering capital accumulation, achieving commercially viable returns, and ensuring a level playing field for all sellers.
The National Association of Realtors praised the FHFA changes. NAR President Leslie Rouda released a statement after the FHFA announced the reduction in loan-level pricing adjustments that the government sponsored enterprises charge on first-time buyers, low- and moderate-income buyers and underserved groups and market sectors.
“NAR applauds FHFA for reducing loan-level pricing adjustments for first-time homebuyers, low- and moderate-income buyers, and a broad swath of homebuyers,” said Rouda Smith. “NAR has long advocated for these reductions, but the benefit of reduced fees to homebuyers is even more important today as we confront the highest mortgage rates in almost two decades. Our members believe that this reduction reflects the strength of the GSEs and that supporting the housing market and taxpayers is their top priority. NAR looks forward to continuing to work with FHFA to improve the real estate market for all Americans.”
In March 2008 the Enterprises created loan-level pricing adjustments, which are additional fees based on loan-to-value ratios, credit scores, and other risk factors. These charges are passed on to borrowers, typically in the form of higher mortgage rates. The reduction of loan-level pricing adjustments will allow homebuyers to face less of a financial burden when buying a home, NAR noted.