When mortgages began to sour last Fall, Fannie Mae and Freddie Mac instituted "loan-level pricing adjustments". The concept is basic: For mortgage applicants with less-than-ideal credit profiles, mortgage pricing is adjusted to compensate for the added risks.
It's still a conforming loan, but with adjustments.
Effective March 6, though, Fannie and Freddie's definition of "high-risk" changed and the adjustments got much more expensive.
Some of the more impactful changes include:
- Regardless of credit score, cash out refinances above 75% loan-to-value are subject to price adjustments
- All LTVs greater than 60% are subject to price adjustments
- All 2-units will be adjusted by 0.500%, regardless of LTV
- All 3- and 4-units will be adjusted by 1.000%, regardless of LTV
If your mortgage application is a conforming loan destined for Fannie Mae or Freddie Mac, these adjustments may already be on your loan officer's rate sheets, but be sure to ask.
If the adjustments aren't built-in yet, consider whether you should lock your mortgage rate right away.
So, even though mortgage rates fell Wednesday, new Loan-Level Pricing Adjustments pushed the underlying payment higher for a lot of Americans.
