Is there are new mortgage tax for those with higher credit scores starting May 1, 2023? **UPDATE 5/10/23 – it appears that FHFA may have partially rescinded some of this rate adjustment. See news release from FHFA 5/10/23. **
Not really…but there is a change in fee structure for new Fannie Mae and Freddie Mac backed loans.
I want to thank Tammy Saul of Federal Hill Mortgage for taking on this topic very directly and breaking down the changes.
The Loan Level Price Adjustment (LLPA) can be very confusing, and on the surface, the terms may seem unfair to those who have worked hard to have high credit scores.
Tammy broke down the LLPA fee and what it means for those who have both higher and lower credit scores.
Here is a direct link to Tammy Saul’s analysis of this fee, including color-coded charts to help explain the changes in costs.
Here is a brief breakdown of what Tammy says: (Note: I added the emphases in her quotes below.)
- Regarding low credit borrowers – are they already getting a discount while high credit borrowers pay more?
“The fact of matter is that LLPAs are indeed changing in a way that improves costs for those with lower credit scores and increases costs for those with higher credit scores (in many cases, anyway). But people are confusing the CHANGE for the ACTUAL cost.”
- Meaning – a low credit borrower isn’t paying less than a high credit borrower? The gap between what they pay is just smaller than it was?
“YES…the change amounts to a tweak of an existing fee structure in favor of those with lower credit scores and at the expense of those with higher credit scores, but there’s no scenario where someone with lower credit will have a lower fee.“
- “Why is the government doing this to people with higher credit?”
“Fannie and Freddie technically have a “mission” to promote affordable home ownership. Here is the statement on the topic by their regulator, the FHFA: FHFA Announces Updates to the Enterprises’ Single-Family Pricing Framework.”
I am very grateful to Tammy for her analysis and taking on this tough topic. Tammy is a highly regarded professional in the Baltimore real estate market, and I trust her take and thoughts on this. Tammy is not only a loan officer, she is also an attorney.
If you are considering getting a Baltimore mortgage, Tammy Saul is a wonderful professional with whom to work!
If you considering buying a home in Baltimore, please contact me!
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