Fhfa Plan Would Bring Llpa Relief For Second Homes And Cash-out Refis

A full overhaul of the loan-level price adjustment (LLPA) matrix — the risk-based fees applied to conventional mortgages — is not currently under consideration by the Federal Housing Finance Agency (FHFA).

Instead, Barry Habib — the MBS Highway founder and CEO who joined Fannie Mae’s board of directors in July — said the approach has been more targeted toward such things as lower costs on non–owner-occupied second homes and cash-out refinances. But at this point, nothing has been established.

“Director (Bill) Pulte really wants to improve things and help,” Habib said in an interview with HousingWire. “It’s not a whole revamp. It’s more narrowed — just second homes and cash-out refis.”

Two weeks ago, Pulte announced that Habib had been tasked with reviewing the LLPA structure: “Barry Habib is great and is working hard to present me options to fix LLPAs (a/k/a PRICING!!!!) and bring some relief to HOME OWNERS AND HOME BUYERS in President Trump’s America! The days of Biden need to be gone!,” Pulte said in a post on X.

On Tuesday afternoon, Pulte posted again on social media about the topic, saying that the FHFA is “opening up the LLPA discussion to other industry pros in addition to Barry Habib’s suggestions. While we appreciate Barry’s deep experience and input, we want a full range of views as we review LLPAs. The first and foremost thing is we want to do no harm!”

Habib described the plan he sent to Pulte as suggestions informed by a “tremendous amount of research,” including conversations with top lenders that sell to Fannie Mae to pinpoint “where their pain points are.”

He said two areas stood out across the industry — the pricing hits on non-owner-occupied second homes and the costs associated with cash-out refinances. “They seem to be most concerned in these two areas,” Habib said.

While a timeline for any changes remains unclear, Habib said that “Pulte has a real desire to help and do good things.”

LLPAs can be paid upfront or built into the interest rate. But with mortgage rates already elevated, there’s often no room to add it there, so the cost has to be borne by the borrower out of pocket. And that can derail transactions.

The Biden administration proposed to revamp the LLPA matrix in 2023, but the revisions increased fees for some borrowers and introduced a controversial new LLPA tied to a debt-to-income ratio above 40%.

Following pushback from state governments and industry trade groups — which argued the changes penalized responsible borrowers — the DTI portion was ultimately rolled back.