Graduate with an “A” for Accuracy in Pricing with Loan Selling Advisor
Caps, gowns and graduations galore, it’s the season of celebrating knowledge and achievement. Earn an “A” in your pricing knowledge with our May 2023 focus on pricing in Loan Selling Advisor®.
Our in-depth emphasis on pricing is sure to strengthen the way you do business because we’re sharing the answers you’ve been inquiring about. Find out more about credit fee caps (including completing the first-time homebuyer delivery requirements), the new Area Median Income and property eligibility tool and the Exhibit 19 Fee Calculator. Now is the time to ensure you’re on your “A” game by providing accuracy in your loan delivery process. Here’s what you need to know.
CREDIT FEE CAP ELIGIBILITY
Under the direction of the FHFA, Freddie Mac recently announced targeted pricing changes, including the elimination of certain upfront credit fees, referred to as credit fee caps, as described in Exhibit 19, Credit Fees. These changes are intended for certain borrowers and affordable mortgage products with specific limits on borrower income as a percentage of area median income. AMI% is defined as “total income used to qualify the borrower(s) for the mortgage converted to an annual basis divided by the AMI applicable to the location of the mortgaged premises.”
Q: What loans are eligible for credit fee caps?
A: Any loan may be eligible for credit fee caps, provided it meets the criteria described in Exhibit 19A, Credit Fee Cap Eligibility Criteria. This exhibit includes eligibility criteria and delivery requirements related to the credit fee caps described in Exhibit 19.
Q: Are all credit fees described in Exhibit 19 included in the credit fee caps?
A: All credit fees in Exhibit 19 are included in the credit fee caps with the exception of the Custom Mortgage Insurance credit fee and the GreenCHOICE Mortgages credit for credit fee which must be added to the caps, as applicable.
NOTE: Please reference footnote #1 in Exhibit 19 which describes exceptions to the credit fee caps.
Q: Does a loan qualify for the Duty to Serve credit fee cap if the loan was originated by a small financial institution and has an AMI% <=100% regardless of location of the property or does the mortgaged premises have to be located in a specified area?
A: The small financial institution must be included on the FHFA’s list, and the location of the mortgaged premises must be designated in a rural area. Refer to the FHFA’s Duty to Serve Eligibility Data website for additional details, including their small financial institutions list.
NOTE: For a loan originated by a small financial institution (as defined by the FHFA), the originator must be delivered in accordance with → Party Information → Loan Originator Details, as described in Guide section 6302.5.
Q: Is any loan with a first-time homebuyer(s) eligible for the credit fee cap?
A: Any loan with at least one first-time homebuyer may be eligible for a credit fee cap, provided:
- the loan meets the eligibility criteria described in Exhibit 19A; and
- the delivery requirements are completed in accordance with Exhibit 1: Instructions for Completing the Borrower First-Time Homebuyer Indicator.
Q: Are loans located in Hawaii eligible for the first-time homebuyer credit fee cap?
A: Yes. Loans with property locations in areas with higher minimum loan limits (i.e., Alaska, Hawaii, Guam, and the U.S. Virgin Islands), as described in Guide section 4603.2, may be eligible for the first-time homebuyer credit fee cap, limited to 100% AMI. Additionally, loans with property locations designated as High-Cost Areas may be eligible for the first-time homebuyer credit fee cap, limited to 120% AMI.
Q: What should I do if loan data already delivered in Loan Selling Advisor® needs to be corrected?
A: If a data change is needed after your loan has been funded, including data changes related to credit fee cap eligibility, you may submit the correction through the Post-Fund Data Correction tool. If a data change results in an adjustment to credit fee assessment, the adjustment will be made in accordance with Guide section 6303.1.
AREA MEDIAN INCOME AND PROPERTY ELIGIBILITY TOOL
In March 2023, we introduced a new Area Median Income and Property Eligibility Tool. This tool can be used to assist with determining whether a loan may be eligible for certain credit fee caps. Use this tool in conjunction with Exhibit 19A to confirm eligibility criteria and delivery requirements. For Home Possible® mortgages, you may also leverage the Home Possible® Income and Property Eligibility Tool.
EXHIBIT 19 FEE CALCULATOR
The Exhibit 19 Calculator – Credit Fees is designed to provide an indication of credit fees or credits for credit fees that Freddie Mac would assess on loans if they were delivered and sold to us. This tool is not intended to determine the eligibility of a product, nor designed to provide actual credit fee assessment.
For ease of use, we’ve updated the fee calculator instructions on our website to include the password (password = “seller”). You are no longer required to call us for this information, but please continue to reach out to the Customer Support Contact Center (800-FREDDIE) with any other questions.
We hope your pricing questions were answered. Please keep this information handy so it can be a great reference and help for you.