Fannie Mae Announces Changes to LLPAs

What is an LLPA?

LLPA stands for Loan Level Pricing Adjustment. An LLPA is an additional fee on top of any points and closing costs paid for a mortgage based upon the Loan to Value Ratio (LTV) and the borrowers’ credit score. So, the higher the LTV and lower the credit score the more you will have to pay for a mortgage. This can take the form of additional points and/or higher rates. LLPAs are risk-based adjustments to the cost of a mortgage (e.g. rates and points).

Effective with loan locked on or after January 18, 2011, loan level price adjustments (LLPAs) will change as outlined below. This is in response to recent Fannie Mae changes.

Changes have been made to:
• LLPAs by Credit Score/LTV
• LLPAs for Subordinate Financing
• LLPAs remain the same for DU Refi Plus



For the first time, the LLPAs for some LTV/Credit score combinations are actually lower. This is in response to higher quality loans being delivered to Fannie Mae and Freddie Mac, the Government Sponsored Entities (GSEs) that own most conforming mortgages in the country.

For information on LLPAs for programs or property types not listed here, please contact me at BarkerLoans@gmail.com or 708-473-7688.

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Why Do I Have 3 Different Credit Scores?

I get this question from customers all the time. Mortgage lenders typically pull credit reports from the 3 main credit repositories – Transunion, Equifax, and Experian. All three of these repositories generate a credit score, which is a numerical representation of your credit history. While the exact formula for computing these scores is a trade secret, we know that your credit score is affected by your payment history, amount of credit available, amount of credit used, and any collections and/or judgments against you.

But why wouldn’t they all have the same score for the same borrower? There are many reasons the scores may differ, but the main ones are:

1. Not all creditors and lenders report to all 3 credit repositories. So, the three repositories do not all have exactly the same information



2. Creditors report to the repositories at different times. Your balance with ABC credit card may be different at the 3 repositories because one may not reflect the last payment or purchase you made on your account and another may.



3. There are several different scoring models that are used. In fact, each repository uses different scoring models depending on the purpose of the score or the requirements of the creditor/lender. So, different models will analyze your credit data differently and give you a different score.

This is why most mortgage lenders pull credit reports from all 3 repositories and use the middle score. By using the middle score, lenders are attempting to get as accurate a credit profile as they can for their customers.

What can I do to improve my credit score?
First, and most importantly, use credit wisely. Do not over extend yourself with credit and always make your payments on time.

Second, the amount of credit you use should be as small a percentage of your available credit as possible. For example, if you have $10,000 of available credit, your score will be higher is you are only using $500 of that available credit than if you are using $7,000 of it.

Third, make sure you know what is on your credit report. The Fair and Accurate Credit Transaction Act of 2003 (FACTA) allows a consumer to request a copy of their credit report, free of charge, from all 3 repositories. To learn how to obtain your free credit report, and for other reasons to monitor your credit, read my blog article, FREE Credit Reports.

For more information or help with your credit, please contact me at BarkerLoans@gmail.com or 708.473.7688.

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