On Monday, Bill Pulte, director of the Federal Housing Finance Agency (FHFA), put out a call to action on X, his preferred communications platform.
“We are actively working on new programs and new products at Fannie Mae and Freddie Mac,” Pulte wrote. “If you have ideas on what to do differently, please reach out!”
Jim Nabors, president of the National Association of Mortgage Brokers (NAMB), had several ideas for the government-sponsored enterprises, and he outlined them in an open letter to Pulte on Tuesday.
No. 1 on Nabors’ wish list was the removal of loan-level price adjustments (LLPAs) on investment properties and second homes. He noted that these risk-based fees charged by Fannie and Freddie “discourage responsible buyers from purchasing second homes” by “significantly increasing the cost of financing.”
“Originally introduced to account for additional credit risk, many of the pandemic-era LLPA increases were not based on updated risk metrics,” Nabors wrote. “In fact, data has shown that loans secured by second homes or investment properties often have strong credit profiles and lower-than-expected delinquency rates.”
HomeReady and Home Possible mortgage prosposals
Nabors proposed increasing the area median income eligibility cap for Fannie’s HomeReady and Freddie’s Home Possible mortgage programs. The low-income programs are currently capped at 80%, meaning a borrower’s income needs to be at or below 80% of the median income level in the location where they are seeking to purchase a home. Nabors suggested increasing the cap to 100%.
“The current 80% cap, while well-intentioned, inadvertently excludes many moderate-income households — especially in high-cost or rapidly growing markets — who earn slightly above the limit but still face substantial housing affordability challenges,” Nabors said. “In 2023, more than 60% of U.S. households reported living paycheck to paycheck, a clear indicator that traditional income eligibility limits no longer reflect modern financial realities.”
Shortening the refinancing window
Nabors noted that the current Fannie and Freddie rules require homeowners to wait a full year after closing to refinance their mortgage. He proposed shortening that cash-out refinancing window to six months to “significantly enhance borrower flexibility and promote financial stability.”
“In a market where interest rates and home values can shift quickly, a six-month window would provide the agility borrowers need to act on positive economic trends,” Nabors wrote.
He added that reducing the refinance seasoning period for Fannie and Freddie loans would “create a more cohesive and competitive mortgage landscape” by aligning the government-sponsored enterprises’ policies with loan standards established by the Federal Housing Administration and Department of Veterans Affairs.
Reducing credit report costs
Lastly, Nabors advocated that the FHFA address rising costs that are often passed on to homebuyers when credit reports are pulled. He urged the Fannie and Freddie regulator to work with the lending and credit reporting sectors to rein in fees that “disproportionately (affect) smaller lenders, independent mortgage brokers and low- to moderate-income borrowers.”
“Credit reporting expenses have surged in recent years, with some tri-merge credit reports now costing lenders over $100 per applicant — more than double what they were just a few years ago,” Nabors stated. “These unchecked increases often lack clear justification, occur without regulatory oversight and ultimately present a growing burden on both lenders and consumers.”
