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Loan Fees Set To Rise For Conforming Mortgage Applicants

LLPA rising April 1 2011Beginning April 1, 2011, Fannie Mae is increasing its loan-level pricing adjustments. Conforming mortgage applicants in TX should plan for higher loan costs in the months ahead.

If you’ve never heard of loan-level pricing adjustments, you’re not alone; they’re an obscure mortgage pricing metric and, thus, are rarely covered by the media. That doesn’t make them any less relevant, however.

LLPAs are mandatory closing costs assessed by Fannie Mae and Freddie Mac, designed to offset a given loan’s risk of default. LLPAs were first introduced in April 2009.

This April’s amendment is the 6th increase in 2 years. LLPAs can be costly.

In addition to an up-front, quarter-percent fee applied to all loans, there are 5 additional “risk categories” in the LLPA equation:

  1. Credit Score : Lower FICO scores trigger additional costs
  2. Property Type : Multi-unit homes trigger additional costs
  3. Occupancy : Investment properties trigger additional costs
  4. Structure : Loans with subordinate financing may trigger additional costs
  5. Equity : Loans with less than 25% equity trigger additional costs

Adjustments range from 0.25 points (for having a 735 FICO score) to 3.000 points (for buying an investment property with just 20% downpayment). And they’re cumulative. This means that a borrower that triggers 3 categories of risk must pay the costs associated with all 3 traits.

Loan-level pricing adjustments can be expensive — up to 5 percent or more of your loan size in closing costs. The fees can be paid a one-time cash payment at closing, or they can be paid in the form of a higher mortgage rate.

The loan-level pricing adjustment schedule is public. You can research your own loan scenario at the Fannie Mae website, but you may find the charts confusing.

Phone or email your loan officer if you’re unsure of what you’re reading.

Posted in: Mortgage Guidelines Tagged: LLPA,Mortgage Rates

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Port Aransas Texas Real Estate
Julie Woodward, Broker/Associate

Address: 1900 State Highway 361
Port Aransas, TX 78373-4894
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This charming home was recently featured in the Caller Times home section! Spacious and inviting 4 bed, 4.5 bath home in Island Park Estates, a beachfront community with a pool and beach cart accessible dune crossover. "Are We There Yet" is a completely renovated beach house beautifully furnished with a coastal flair. Large open kitchen, dining, living and wet bar with views out every window. Huge covered deck to enjoy the views plus a covered porch for alfresco dining, grilling and relaxing. Third floor master has a private deck with spectacular Gulf views and remodeled bath with ceramic shiplap planked walk in shower and quartz countertops. Luxury vinyl plank flooring throughout and new exterior Duxxbak decking system. Ground floor has 2 beds & baths with a second spacious living area ideal for kids and cart garage. Lots of natural light throughout the home with many outdoor options for views and relaxation. A popular rental it sleeps 18. Excellent investment opportunity! Wow! $995,000 Active

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