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When is a loan-level price adjustment required?

For both whole loan and MBS transactions, Fannie Mae may apply one or more loan-level price adjustments (LLPAs)  based on certain loan-level credit risk characteristics, such as credit score, loan purpose, occupancy, number of units, and product type. All LLPAs are cumulative. LLPAs are applied according to the following: 

  • Whole loans: LLPAs are calculated on the “Purchase Ready” date (as reflected in Loan Delivery) based on the unpaid  principal balance of the  loan. All applicable LLPAs will be deducted from the purchase proceeds.
  • Loans in MBS: LLPAs are calculated on the MBS pool issue date based on the pool issue balance. All applicable LLPAs will be drafted from the lender’s account designated for that purpose.

Lenders may be eligible for an LLPA refund on certain loans repurchased by the lender, as determined by Fannie Mae in its sole discretion. The refund will be calculated based on the LLPAs charged at acquisition less a processing fee of 50 basis points of the unpaid principal balance at acquisition. If the total of all LLPAs paid by the lender for a loan is 50 basis points or less, Fannie Mae will not refund the LLPA. The LLPA refunds are available only for loans originally delivered as whole loans and repurchased within 18 months of acquisition by Fannie Mae. The refunds will be issued to the responsible party for the selling representations and warranties as a separate transaction (independent from the repurchase transaction) in the month following the completion of the repurchase.

For a current listing of LLPAs, see the Loan-Level Price Adjustment (LLPA) Matrix.

For complete topic information, see C1-1-01, Execution Options.

 

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