As a follow up to Fannie Mae’s recent guideline changes, they will now be taking steps to make conventional loans more expensive across the board. A few years back, Fannie Mae instituted an aggressive round of Loan Level Pricing Adjustments (LLPA’s) and an Adverse Market Delivery Charge (AMDC) to add market risk into their loan pricing. AMDC’s apply to all loans and LLPA’s are based on a combination of credit score and Loan to Value. Here is a before and after picture of the pricing hits that will be effective April 1, 2011 These are not slight adjustments to the consumer’s interest rate. Most of them are additional hits to pricing of 0.25% or 0.5% to the cost of the loan (not the rate). While the adjustment to interest rate these pricing hits will translate into will vary based on market conditions, it’s a reasonable assumption to conclude that they will affect rates by at least 0.125% and in some cases 0.25%. It would appear that just when we thought that FHA loans were getting less attractive when compared to conventional loans, Fannie Mae has taken steps to increase the appeal of an FHA loan.
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