The Federal Housing Finance Agency made known in a recent announcement of its plans to remove upfront fees for specific borrowers and inexpensive mortgage products. This comes as a part of the ongoing revamp of Freddie Mac and Fannie Mae’s guarantee fee pricing framework started in 2021. However, the agency also plans to enforce focused increases to the upfront fees for most cash-out refinance loans beginning in February 2023.

In most parts of the United States, the FHFA will waive upfront costs for first-time homebuyers earning at or below 100% of the area median income and below 120% of AMI in high-cost locations. In addition, the FHFA is removing upfront fees for the agency’s affordable mortgage programs, HomeReady and Home Possible; HFA Advantage and HFA Preferred loans; and single-family loans supporting the Duty to Serve program as part of its assessment of g-fees.

In its 2022 Scorecard for Fannie Mae, Freddie Mac, and their jointly owned securitization platform, Common Securitization Solutions, the FHFA explicitly stated its intent to change the GSEs’ pricing system. The regulated companies were told to “improve support for key mission borrowers while stimulating capital accumulation, attaining viable returns, and guaranteeing a level playing field for small and large sellers.”

The FHFA increased upfront fees for high-balance loans by 0.25% to 0.75%, graded on loan-to-value ratio, effective the 1st of April, 2022. The upfront costs for second home loans ranged from 1.125% to 3.875% and were likewise tied to the loan-to-value ratio. To read more on this, click here.