Page 11 - June 2023 Issue.indd

If you are looking to purchase a home and you have credit GSE’s (Government Sponsored Enterprises) saw a 50% drop
scores in the low to mid-600 range, you should consider in loan volume.
other loan programs like USDA, FHA, and VA. Th e interest
Assuming each GSE collects .375% in additional revenue on
rate on these programs can be as much as .5 to .75 lower
$500,000,000,000 ($500 billion) in loan volume, they would
than conventional loans, plus monthly mortgage insurance
receive $1.875 billion in additional annual revenue they didn’t
premiums are lower than conventional loans. In the case of

have before this change. This is my unscientific estimate of

VA loans there is no monthly mortgage insurance premium.
the net eff ect of the LLPS change to make my point. (To get
To qualify for a VA loan, you must be a veteran. To qualify for this number I had to get Google to do the math, I don’t have a
USDA, your household income must be less than $121,350 for calculator that would allow me to put in 11 zeros.)
a family of four or less and $160,200 if you are a family of fi ve
or more. FHA loans have no special eligibility qualifi cation (continued on next page)
requirements.
Monthly mortgage insurance payments are .55% for FHA Atlantic Paving & Concrete
loans and .35% for USDA loans. For our $285,000 loan the
monthly premium would be $131 for FHA and $83 for USDA, Meeting all your needs!

both of which are significantly lower than the $194 or $218 for
conventional Fannie and Freddie loans. Asphalt • Concrete
Asphalt Millings • Stone
I must also note that in addition to paying the monthly Grading • Snow Removal
mortgage insurance premiums for USDA and FHA, there
are required upfront mortgage insurance premiums of 1.0% Licensed, Bonded, Insured
MHIC MD#85409
for USDA and 1.75% for FHA. Both of these are financed DE#2002110154 Office: 410-479-4477
and added to the loan amount of $285,000. Regardless of this Mobile: 240-417-2033
increase in loan amount the combination of lower interest 10025 Miller Rd,
Denton, MD FAX: 410-479-3877
rates and mortgage insurance premiums makes it quite clear
that very few lower credit score borrowers will benefi t from

lower LLPA’s. They will use a different loan program altogether.

There are many other moving parts with this increase of LLPA’s

for higher score borrowers to subsidize a decrease of LLPA’s for
lower credit score borrowers. I do not want to go too deep into
the weeds with individual credit score bracket changes because the market is
I believe my interpretation captures the essence of the issue.
By this action the Biden administration is furthering its
agenda of making the purchasing of a home more aff ordable.
In response to the doubling of interest rates in the last 14-16
months the LLPA change is a lot of noise with very little action.

A more significant step was taken on March 20, when the FHA
lowered the annual mortgage premium from .85% to .55%.
Prior to March 20th the premium would have been $70 more
or $201 than the $131 in our example.

Under the guise of making housing more affordable this change
will have no positive impact for those with lower credit scores
purchasing a home, other loan programs will be a better option.
But this change will have a significant impact on Fannie Mae

and Freddie Mac’s bottom line.
10794 Greensboro Road
Regardless of all the moving parts of this change and the Denton, MD 410-479-4663
politics of those doing the right thing paying for those who
don’t, the bottom line is Fannie and Freddie will rake in .375% www.TheBrenton
more revenue.
RealtyGroup.com
Fannie Mae’s volume of single-family loans dropped from KATHLEEN BRENTON, BROKER
$1.4 trillion in 2021 to $615 billion in 2022. Freddie Mac KATHLEENBRENTON@GMAIL.COM
dropped from $1.29 trillion to $619 billion. Basically, both
(410) 829-3430

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