FHFA updates GSE loan pricing, slashing certain upfront fees

Read more: FHFA mandates Fannie Mae, Freddie Mac to update pricing framework

The agency expects the pricing adjustment to result in savings for approximately one in five mortgage borrowers.

Meanwhile, FHFA aims to increase the upfront fees for most cash-out refinance loans, which have high risk of default. FHFA said it will start implementing the new fees for cash-out refinance loans on Feb 1, 2023, to minimize market and pipeline disruption. The fee reductions, on the other hand, will go into effect as soon as possible.

In March 2008, Fannie Mae and Freddie Mac created loan-level pricing adjustments, which are additional fees based on loan-to-level ratios, credit scores, and other risk factors. These charges are passed on to borrowers, typically in the form of higher mortgage rates. The fee reduction will allow homebuyers to face less of a financial burden when buying a home.

Bob Broeksmit, president and CEO of the Mortgage Bankers Association (MBA), said that the pricing adjustments are “well-timed” given the ongoing affordability challenges facing homebuyers.