Agents - Don't Worry About the LLPA

You may see headlines about Loan Level Price Adjustment (LLPA) changes effective May 1. I wanted to share a couple of thoughts about what is going on and why we didn’t make a big stink of it when it happened months ago. We are not taking a position on whether this is a good or bad thing.

What is the big deal?

LLPAs are adjusted regularly. This change was significant because of the number of adjustments and the positive impact on borrowers of low credit. Why the headlines? 62% of purchase transactions will see a price increase of 0.12% TO FEE on average. As a reminder, it takes, on average, 0.25%-0.375% to move the interest rate to 0.125%. So, rates won’t go up.

Another thing to note is that most lenders included these LLPAs in their business in March. So, if your borrower has an active quote, it most likely includes the current pricing.

How will it impact your buyers?

Overall, the policy is intended to make homeownership more affordable. Whether they accomplished that will be seen in the numbers years from now. The reality is that if your borrower struggled to qualify in December, they aren’t significantly better off now. Rates move more in a day than the impact of this change.

Individuals with low credit scores still pay a higher interest rate.

I am reluctant to outline the individuals impacted because we risk making a big deal out of a non-event. Some people will pay a little more, some a little less. At the end of the day, the question remains: are you comfortable with your monthly payment?

There are two great articles you can read with details and the math:

Mortgage News Daily Article

Experien Analysis