On top of the previously announced 10 basis point increase in Fannie Mae and Freddie Mac guarantee fees, Fannie and Freddie have published new Loan Level Price Adjustments (LLPAs) which will be effective April 1, 2014. The primary effect of the adjustments is to increase LTV/Credit Score LLPAs by 25 to 150 basis points. Offsetting these increases somewhat, the 25 basis point Adverse Market Delivery Charge will be eliminated for all states except New York, New Jersey, Connecticut, and Florida.
Senate Bill 3217 Restoring American Financial Stability is working its way through the Senate and is expected to be passed in the coming weeks. Certain provisions of this bill will have a significant impact on the mortgage industry. As you may recall, the Senate Bill 3217, as originally proposed, included a provision which would have required 5% of the risk on all loans originated be retained by the originator upon sale to investors. The provision was not clear as to which entity or entities in the origination chain would be required to retain the risk. It was not clear whether the risk that was to be retained would be an ownership interest in the loan or reserves supported by cash. It was also not clear how long the originator would have been required to retain the risk. The original provisions would have been devastating to the mortgage industry. The 5% risk retention would have forced many mortgage originators from the business and would have driven mortgage rates much higher. After significant industry efforts, this provision was amended last week. The amendment, as passed by the Senate, does very little to answer these questions, but what it does do is exempt [...]