[David] Alice. Good to have you here with us today. What you got for our audience.
[Alice] Hi, Dave. So today I wanna just double down on what the MBA Mortgage Minute was talking about regarding the advocacy piece. MBA met with Secretary of Treasury. They sent in a team. Mortgage experts and CEOs were there. So this is the opportunity for every one of our listeners to now write to your Congress people, because this is a topic, housing is a topic, housing affordability is a topic. So, go back and listen to Adam Segment and in that article, or you can go read the MBA News link current issue, which I do all the time and you’ll see that there’s three top things that seem to be getting, under the top of their agenda are this issue with the Tri Merge credit report requirements. Obviously reducing the single family MIT, but also they’re talking about going after loan level price adjustments. LLPA. And I thought it would be helpful for our listeners to hear from this group a little bit more about that’s not a simple task, right?. To go to Fannie and Freddie and say, Hey, stop charging loan level price adjustments. Our listeners who don’t do this every day probably can’t picture the massive grids that are out there for all the components that change the price of a loan between housing type loan to value, credit scores, product type, and so many other factors that it’s not easy to just go, Hey, eliminate them because Fannie and Freddie will turn around and say, alright does everybody want the same rate? Whether you’ve got a 780 or 800 credit score, and those who have a 640 credit score, should they all have the same interest rate even though they represent very statistically and straightforwardly a different risk to the agency. So this topic around the table with MBA, I would love to hear this group’s thoughts on loan level price adjustments and just give our audience a little bit more of a background from a mortgage expert standpoint, because it makes my, I get, it’s like nails on a chalkboard when I try and hear a newscaster try and talk about LLPAs because they don’t know what they’re talking about. They just read somewhere.
[David] Alice, what do you do? Do you get a sentiment out there for when you’re talking with lenders? or your own sentiment about LLPA. I’ve got so many.
[Alice] I think we absolutely should. Yeah. We should look at what is an overreach, what is, what that’s point really would help. What really would help say first time home buyers? can Fannie and Freddie give us some financial information, a statistical information that would actually show our, of course they’re probably not going to open up that curtain, but. I think, we pay for them. So we really need to know whether or not, what is truly a profit center for them and could be reduced to help affordable interest rates for more homeowners.
[David] Yeah. There, LPAs have a place and it’s the use of them to truly manage and get to where we need to be so that we have the greatest advantage for the borrow. I think borrower, it’s gotta be focused on how are we helping the first time home buyer more than anything else.
[Alice] No one I don’t think wants to talk about reducing investor lls, right? Yeah. But I don’t think, for example,
[David] I agree. Bill, what’s your thoughts on LLPAs?
[Bill] And Alice kind of touched on it you have to answer a couple of other questions first. What is the appropriate return on capital for Fannie and Freddie? And then you get, how do you get there? Compare FHA where there pretty much, from the insurance side here, I mean there are a couple of different buckets, but effectively the FHA MIP is what it is. No surprise, FHA gets adversely selected. Let’s put the first time home buyer part away for a sec. FHA gets adversely selected in the credit spectrum because high LTV, low credit score loan, you’re gonna be much better off going FHA than conventional. So, that’s the downside of blended pricing. that’s number one, number two, right? Because, Fannie has incredible data and like I’m sitting here looking at just, Fannie’s, LTV, FICO grid, and there may be 60,000 in that particular section. Make no mistake that they have very specific performance data sell by sell. It’s what do you want them to do with it and when you start getting into, kind of proxy positions is where if, let’s say you subsidize the higher LTV loans, figuring that’s more first time home buyer driven, you know that can, could be okay as long as everybody acknowledges that, the non-first time home buyer, let’s say, is paying for that subsidy, right? And that’s where people start getting squeamish, right? That I want is easy, here’s what I’m willing to give up to get it, is where you start getting very different opinions and that’s, I think again, there needs to be, what do you want the big picture to look like before you start saying, eliminate this, subsidize this.
[David] Yep. Good. Great commentary. Allen, any thoughts?
[Allen] I agree with all the opinions. I think some great things have been said. I probably wouldn’t do anything then just repeat what they’ve always said, what my other co-host have said so graciously
[Bill] Another point in kind of the, why this is significant, so go back to where our conversation started and we’re talking about, rates moving from 601 to 595 and that’s meaningful when you start getting up into the higher LTVs, even, decent credit scores and you’ve got LLPAs of a point or a point plus, right? That starts translating into a quarter in rate again, we’re getting excited about five basis points, and you have LLPAs equating to 25 basis points in rate. That’s why it’s such a meaningful and hard conversation to have. But, it is pretty significant in terms of driving affordability, if that’s the objective.
[David] Alice, this, you’ve raised a really interesting discussion. I’m, as I’m hearing us talk about it, a whole lot of things we may wanna continue this discussion into next week. Such a good, it’s such a really timely topic, obviously, because of what’s going on.
[Alice] All right, thank you. Yes, let’s do that. Because I think and here what lenders are thinking, do they, is this really a hot button for them that they want to see continue to push forward and excel? What are the tranches or the buckets that they really want to see moved. Is it, seems like refinance is the only thing that’s been discussed and put on the table, but that doesn’t help the purchase market at all.
[David] Exactly right. Thanks for dialing in while you’re traveling, Alice. Always appreciate the report. Thank you.
Alice Alvey, Master CMB
She handles development of their World Class Training program designed to support UHM partners and organizational effectiveness.
Prior to UHM, Alice served as Senior Vice President at Indecomm leading the Indecomm-Mortgage U division, Internal QA and Compliance and SaaS technologies. Indecomm acquired Mortgage U in 2013, where Alice was President/Co-founder, providing training and consulting since 1996. Prior to MU she served as SVP of Operations at a national bank overseeing operations for wholesale, retail and correspondent from underwriting through servicing, and compliance.
She has been in the trenches of mortgage lending operations from application through servicing for over 30 years. Her authoring work in training content, policies and procedures and the FHA/VA Practical guides illustrates her ability to bridge regulatory requirements with day-to-day operations.
Alice has been a weekly contributor to the Lykken on Lending show since its beginning in April 2009 and has made her weekly contributions to 450+ episodes!