Redesigned and recalibrated upfront fee matrices for purchase, rate-term refinance, and cash-out refinance loans.

Effective May 1, 2023, upfront risk-based fees the GSEs charge-specifically Fannie Mae's Loan Level Price Adjustments ("LLPAs") and Freddie Mac's Post-settlement delivery fees-are changing. Additionally, the GSEs have adopted a new fee framework, notably distinguishing between purchase and refi fees (limited cash-out, or the smaller of +$2,000 or an increase of 2% UPB, is a new category and cash-out remains a separate category) and charging in a new LTV based fee for DTI>40.  While there appears no linear or directional relationship to the magnitude fee changes, we are able to generalize with the following:

1. The average borrower will see a fee increase.
2. We do not expect any shift from FHA to Conventional loans despite the deep high LTV cuts, as the economics still favor FHA. 
3. A new category of limited cash-out refinance sees the most fee increases, in the center of the grid. 720-739 FICO, 80<LTV≤85 sees the largest increase of 1.25% and the few cuts are generally at the highest and lowest FICOs. Again, bottom corner <620 FICO, >97LTV is the largest beneficiary, receiving a 1.25% fee decrease. You can contact your Citizens AE to help you navigate the changes to the Agency LLPA schedules.
4. The cash out fee increases announced today are nearly identical to those announced in November, effective in February, the exception being that most ≤30LTV borrowers will see up to 1% reduction come May, as will LTV>60, FICO >660 borrowers.
5. For investment properties and second homes, the lowest LTVs ≤70 actually see lower add on fees, of a healthy 50-100bps on top of the cuts in base LLPA which most of these FICOs observe.
6. New LLPAs for DTI>40% are either 25bps for 60<LTV≤75, or 37.5bps for LTV>75. 

The “beneficiaries” would appear to be the Mortgage Insurance companies (more business on high end LTVs for that sector, so no surprise they are applauding the news). 

Source: BAML Research