Loan-level pricing adjustments are the government's way of raising prices for so-called 'riskier' borrowers without putting a penalty on 'safer' ones.
In January, the Federal Housing Finance Agency announced a change in the pricing models for new government-backed mortgages.The policy changes something called"Loan Level Price Adjustments," fees on government-sponsored loans like Fannie Mae or Freddie Mac.
"A fee of going from .5% to 1% fee on a $400,000 loan, you know, it's not nothing. You know, it's $4,000. So, I certainly understand why there is a little bit of frustration from some people, especially when you take into consideration that right now the housing market is expensive," said Jacob Channel, Senior Economist at Lending Tree.
In response to inquiries, a White House spokesperson told fact-checking outlet Snopes:"The White House does not direct the actions of independent agencies."The agency behind the change, the FHFA, regulates Fannie Mae and Freddie Mac, the semi-governmental organizations that buy most mortgages across the country.
But the fee change depends on a lot of specifics beyond your credit score, and that's where things get confusing. If you have a higher credit score, you will qualify for a mortgage rate that is lower. So proportionally, the cost of your loan should still end up being lower than a loan for a homebuyer with a low credit score.And according to the FHFA, buyers with good credit scores are not subsidizing the fees of buyers with lower scores.
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