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A little-known mortgage fee will change on May 1. It could cut prices for people with lower credit scores, but it might boost them for borrowers with higher credit ratings.
HOLLYWOOD, FLORIDA – OCTOBER 27: A ‘For Sale’ sign is posted in front of a single family home on October 27, 2022 in Hollywood, Florida. The rate on the average 30-year fixed mortgage hit 7.08%, up from 6.94% the week prior, according to Freddie Mac. Mortgage rates surpassed 7% for the first time since April 2002. (Photo by Joe Raedle/Getty Images)
Some mortgage professionals are alarmed by the revamp of the so-called loan-level price adjustment (LLPA) fee, The New York Post noted, because they claim that buyers with excellent credit will essentially be underwriting those with poor credit. Other experts, however, dispute that.
Sensitivity to the change in fees may be increased given the current state of affordability in the real estate market, which is pricing many buyers out of purchasing a home. The Federal Housing Finance Agency, which levies the fees, issued a statement this week declaring such concerns “a fundamental misunderstanding.”
READ ALSO: Mortgage Rates Decreased Making Home Prices More Affordable
Mortgage Fee Overhaul: How This Affects Homeowners
The mission of the mortgage fee overhaul, according to UMortgage founding partner Matt Gouge, is to lessen the burden on those who have had a difficult time finding housing.
He told CBS News that people with poorer credit scores and cheaper down payments benefited the most. He said, “Their fees are dropping the most.”
For instance, the LLPA will drop from 2.75% to 1.5% for a homeowner with a credit score between 640 and 659 and a 5% down payment
For others, though, it is rising. Homebuyers with credit scores between 740 and 759 and 20% down payment will now be subject to an LLPA of 1%, up from 0.5% before.
The new charge solely affects purchasers; those who already have a mortgage or who own their homes outright are unaffected. Additionally, it won’t have an effect on the 40% of mortgages that are not backed by Freddie Mac or Fannie Mae.
READ ALSO: The Wait is Over: Mortgage Rates Predicted to Drop for Homebuyers
