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Loan Level Price Adjustments for U.S. Borrowers: FHFA Update, 5 Checks

· By the HomePilot team · Reviewed by a licensed loan officer · Company NMLS #2752340

Loan Level Price Adjustments for U.S. Borrowers: FHFA Update, 5 Checks

Loan level price adjustments, or LLPAs, are upfront, risk-based fees that Fannie Mae and Freddie Mac apply to most conventional loans under Federal Housing Finance Agency oversight. They do not touch FHA, VA or USDA loans. Lenders either fold the fee into your quoted interest rate or charge it as upfront points, so LLPAs shape both your rate and how much cash you bring to closing.

TL;DR:

  • LLPAs only apply to conventional loans sold to Fannie Mae or Freddie Mac, not to FHA, VA, or USDA loans, and are charged at delivery, not annually.
  • Risk factors like credit score, loan-to-value ratio, occupancy type, and loan purpose significantly determine the amount of LLPAs on a loan.
  • LLPAs are embedded in the loan estimate figures, so borrowers should review origination charges, total loan costs, and the five-year cost line for accurate cost understanding.
  • Changes to the FHFA pricing framework in 2023 introduced more borrower-specific waivers and credits, but individual LLPA amounts may vary with ongoing updates.
  • To manage LLPA costs, borrowers should compare multiple offers with identical points, calculate five-year expenses, and consider whether paying points or accepting lender credits best suits their situation.
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Table of Contents

How LLPAs work and where they come from

LLPAs are separate from the ongoing guarantee fee that Fannie Mae and Freddie Mac charge across the life of a loan. The upfront fee is charged once, typically drafted or deducted around the time a loan is pooled into a mortgage-backed security or reaches its purchase ready date, and it gets baked into the price a lender quotes you well before that back-office step happens.

The two agencies use different names for functionally similar pricing grids. Fannie Mae calls its version the Loan-Level Price Adjustment Matrix, while Freddie Mac refers to its version as the credit fee in price, published in its credit fee grids and guide. Both grids also carry special feature codes, or SFCs, that flag a loan for a specific waiver, credit or fee condition.

A few structural points matter when you are trying to verify what applies to your file:

  • LLPAs apply only to conventional loans sold to Fannie Mae or Freddie Mac, not to FHA, VA or USDA loans.
  • Special feature codes attach waivers, credits or exceptions to specific loan types inside the matrix.
  • The fee is charged once at delivery, not annually, which distinguishes it from the ongoing guarantee fee baked into your note rate.

Because the fee is tied to delivery rather than closing, the guarantee fee framework set by the FHFA’s pricing framework governs both grids even though Fannie Mae and Freddie Mac publish them separately.

Which risk factors drive your loan level price adjustments

LLPA matrices are built as grids, with credit score across one axis and loan-to-value across the other. A few other variables shift which cell in the grid applies to you.

  • Credit score bucket: matrices group scores into bands, and a borrower with no representative score at all is typically assigned the least favorable bucket.
  • Loan-to-value ratio: gross LTV is used for most pricing tiers, but mortgage-insurance-related LLPAs sometimes reference a net LTV that accounts for the MI coverage itself.
  • Occupancy: primary residences carry the lowest fees, second homes carry a mid-tier add-on, and investment properties carry the highest.
  • Loan purpose: purchase and limited cash-out refinances price more favorably than cash-out refinances, and high-balance loan amounts often trigger an additional layer of fees.
  • Property type and units: two-to-four-unit properties and subordinate financing behind the first lien both add pricing hits on top of the base grid.

These factors stack. A second-home purchase with a lower credit score and subordinate financing behind it can accumulate several LLPAs at once, each pulled from a different row or column of the same matrix published by Fannie Mae or Freddie Mac.

Where LLPAs show up on your Loan Estimate

LLPAs never appear on your Loan Estimate as a labeled line item. Instead, they get absorbed into the numbers a lender quotes, which means you have to know where to look to see their effect.

  1. Check origination charges (Section A) for any points or fees the lender is charging directly.
  2. Check total loan costs (Section D), which rolls up every fee tied to originating the loan.
  3. Check lender credits (Section J), which show whether the lender is offsetting some of your costs with a higher rate.
  4. Check the “In 5 years” line on page 3, which the CFPB’s Loan Estimate guidance identifies as the clearest single number for comparing total cost across offers.

A lender can choose to absorb LLPAs into your quoted rate, which raises your monthly payment slightly over the life of the loan, or charge them as upfront points, which raises your cash-to-close but keeps the rate lower. Neither approach is inherently better: it depends on how long you plan to keep the loan and how much cash you have available at closing.

Pro Tip: Ask every lender for a Loan Estimate with the exact same points or credit structure, zero points versus zero points, so you’re comparing rate against rate instead of two different pricing strategies.

FHFA’s pricing framework updates and current LLPA waivers

Illustration of mortgage pricing adjustments and waivers

The FHFA announced updates to the single-family pricing framework in 2023, redesigning the upfront fee matrices to align more closely with the risk factors used in the Enterprises’ capital framework. In a public statement, then-FHFA Director Sandra L. Thompson described the changes as a safety-focused recalibration rather than a blanket cost cut, noting that fees moved in both directions depending on borrower and loan attributes.

Several waivers and credits sit inside the current matrices and are worth checking against your own file:

  • First-time homebuyer exemptions tied to area median income limits.
  • HomeReady and Home Possible program credits for eligible low-to-moderate income borrowers.
  • Duty to Serve credits supporting rural and underserved market lending.
  • Special feature codes for energy-efficient homes and completed housing counseling.

An earlier proposal to add a debt-to-income-based fee tier was floated and later withdrawn, and both agencies continue to update their matrices periodically, so the exact fee that applies to a given credit score and LTV combination can shift from one release to the next.

Steps borrowers and originators can take to manage LLPA costs

You cannot negotiate an LLPA itself since it comes from a published matrix, but you have real control over how the fee gets passed through to you.

  1. Pull Loan Estimates from more than one source using identical points and credit structures.
  2. Calculate the five-year cost of each offer using the CFPB’s comparison line as your benchmark.
  3. Ask each lender whether the fee is being absorbed into rate or charged as points, then request the alternative structure to compare.
  4. Run the break-even math on paying points: divide the upfront cost by the monthly savings to see how many months it takes to recoup the expense.
  5. If you qualify for FHA or VA financing, compare that pricing against conventional, since LLPAs never apply to those programs.

Bring your last two Loan Estimates, your credit score range, and your planned holding period to any rate discussion or lock-day conversation. Those three pieces of information let a loan officer show you exactly how points versus lender credits play out for your situation.

Pro Tip: HomePilot’s free Loan Estimate review checks your existing offer against live wholesale pricing, which is one of the fastest ways to see whether a fee you’re being quoted is a true LLPA or added lender markup.

Why we built HomePilot around pricing transparency

We are a family-owned wholesale mortgage broker, licensed in Arizona, California, Colorado, Florida and Texas under NMLS #2752340. Because we price every file across 40+ wholesale lenders instead of one bank’s rate sheet, we can show you how the same LLPA gets priced differently from lender to lender. We publish live rates against the national average every business day, charge $0 lender fees, back our pricing with a published $500 Best Price Guarantee (eligible offers, terms apply), and our purchase loans typically close in about 20 days from accepted offer, with a standard commitment of 30 days or less.

The HomePilot Team

Get a second look at your loan pricing

If an LLPA is inflating your rate or your upfront costs, the fastest way to find out is to have someone compare your numbers against the wholesale market. HomePilot prices your file across 40+ wholesale lenders at once, so you see the actual range of what’s available rather than one institution’s single quote, and we charge $0 lender fees on every loan we close.

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Submit your current Loan Estimate through our free Loan Estimate review and we’ll show you how it stacks up against live wholesale pricing, including the five-year cost comparison the CFPB recommends. If you’re further along and ready to compare numbers directly, check today’s live rates or start a purchase or refinance quote. Every quote is backed by our $500 Best Price Guarantee on eligible offers, terms apply.

This article is general information, not a substitute for advice from a qualified financial advisor. Consult a qualified financial professional about your own circumstances before acting on anything here.

Sources

FAQ

What are loan level price adjustments?

Loan level price adjustments are upfront, risk-based fees that Fannie Mae and Freddie Mac charge on conventional loans, based on factors like credit score, loan-to-value ratio and occupancy. They are set under FHFA oversight and show up in your quoted rate or upfront points rather than as a separate line item.

What is the 3-7-3 rule for a mortgage?

It’s industry shorthand for the federal disclosure timeline under the TILA-RESPA rule: you get your Loan Estimate within 3 business days of applying, closing can’t happen until at least 7 business days after that Loan Estimate is delivered, and you must receive your Closing Disclosure at least 3 business days before closing. It has nothing to do with LLPAs, but it frames the window you have to compare offers.

Is an 80% loan-to-value ratio good on a mortgage?

An LTV at or below common conventional loan limits generally lands in a favorable pricing tier on the Fannie Mae and Freddie Mac grids and typically avoids private mortgage insurance on a conventional loan. Whether it’s “good” for you depends on your cash reserves and how the resulting payment fits your budget.

What types of caps affect adjustable-rate mortgages?

Adjustable-rate mortgages typically carry caps on the initial adjustment, on each later periodic adjustment, and on the lifetime ceiling for the rate over the full loan term. These caps are separate from loan level price adjustments, which are charged upfront on conventional loans regardless of whether the rate is fixed or adjustable.

Do LLPAs apply differently to refinances than to purchases?

Yes. Cash-out refinances generally carry higher LLPAs than purchase or limited cash-out refinance loans on the same Fannie Mae and Freddie Mac matrices, since the agencies treat cash-out transactions as higher risk. If you’re refinancing to pull cash out, comparing that pricing against a rate-term refinance or a HELOC alternative is worth doing before you lock.

HomePilot Mortgage, NMLS #2752340, is a licensed mortgage broker in Arizona, California, Colorado, Florida, and Texas. Equal Housing Lender. This article is general information, not a loan offer or a commitment to lend. Rates and program terms change daily and depend on credit, loan amount, and county. HomePilot Mortgage is a private company, not affiliated with or endorsed by the Department of Veterans Affairs, HUD, or any government agency.