Fannie Mae and Freddie Mac secure almost 80% of all loans in the United States. So with recent buzz about LLPA changes coming this spring, you and your clients may be wondering “does this affect me?” Here’s what upcoming changes could mean to you and interest rates.
LLPA stands for Loan Level Pricing Adjustment and it refers to the additions or subtractions made when calculating an interest rate. You always see disclaimers on rates that refer to a minimum FICO score or maximum loan to value. That’s because these are two of the factors that can affect what LLPA is added or subtracted to give us the final interest rate. These LLPAs are set by Fannie Mae and Freddie Mac (commonly referred to as the agencies) and are the same for all lenders.
Earlier this year, Fannie and Freddie announced changes to their LLPA models that will have an impact on many homebuyers, set to go into effect just as the spring housing market gets into full swing. The agencies announced an agenda to make homeownership more attainable for a wider group of people and are creating incentives around first-time homebuyers, lower to moderate-income buyers and those who may have less than perfect credit. All of those categories may have missed out on the housing boom of the past few years.
So why should you care? This could be an opportunity to reconnect with potential clients who felt they were priced out of the market before, or were told the rate would be too high and thus the payment too expensive because they had less than perfect credit. There is much hype out there that this will make loans more expensive — and in some cases, it may — but there is much opportunity to work with a large segment of potential buyers that never thought (or were told they couldn’t) own a home.
We don’t want you to be experts in LLPAs – but we do want you to know you have a partner that is in Key Mortgage can help you navigate these changes and partner together to help prospect more clients and get more people into homes. If you have any questions, reach out to a Key Mortgage loan officer.