Thompson, who has been acting director since June, also spoke about the FHFA's plans to close the racial-equity gap in homeownership. “Fannie and Freddie are double pricing home buyers because not only are they forcing them to pay for the mortgage insurance, they also pay these loan-level price adjustments and both are essentially providing first-loss coverage,” said Dave Stevens, a former FHA commissioner who is now the CEO of Mountain Lake Consulting. They typically obtain home loans from the Federal Housing Administration. Many experts think the loan-level price adjustments clash with the GSEs’ mandate to support underserved communities since the fees reduce the affordability of loans backed by Fannie and Freddie.īut borrowers that are unable to make a 20% down payment on a home are required to have private mortgage insurance as well, which means many borrowers with low credit scores and down payments are priced out of the conventional market.
The GSEs are required by law to finance only loans in which the borrower has demonstrated an ability to repay. The fees can add up to 3.75% in upfront fees but typically translate into roughly 0.75%, or 75 basis points, added to a borrower's annual interest rate. He wanted an additional buffer to account for the risk posed by borrowers with lower down payments. The loan-level price adjustments were added to the cost of home loans backed by Fannie and Freddie under former acting FHFA Director Ed DeMarco. “We really want the enterprises to put together some strategies to try to help us move the needle on equitable housing,” said FHFA Director Sandra Thompson.
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