Today’s LLPA fix is not the first

Both Richardson and colleague Nate Fein of UMortgage in Pensacola broke down the details in a previous interview with Mortgage Professional America. To put the issue in greater context, they reminded of the last significant LLPA overhaul related to second homes.

Hack helped fuel the rise of the short-term rental market

“You gotta go back a little bit to 2022 and when LLPAs were changed significantly for second homes,” she said. “Second homes meaning you Airbnb it. With these loan fee charts, there were certain little down payment cheat code zones – little sweet spots where you could get a hell of a deal. One of those was second homes. You could put 10% down – yes, you’d have mortgage insurance — and basically have a rate almost the same as if it were a primary residence.”

The “cheat code” surrounding second homes helped give rise to the Airbnb cottage industry, she said: “That’s the reason why Airbnbs took off, because people were like ‘shoot, I can get cheap money without a lot of out-of-pocket. Those got changed in a very significant way last year. And that was because FHFA, when they release their commentary around their mission – and that of Fannie Mae and Freddie Mac – is to support affordable housing – not to subsidize somebody’s side hustle.”

In a statement released last week to debunk motives behind the latest LLPA change (some observers posited it was a move to reward bad credit by having those with larger down payments and better scores subsidize), FHFA’s director, Sandra L. Thompson, reiterated the agency’s mission.

Reiterating the mission of affordable housing

“FHFA is first and foremost a safety and soundness regulator, and the Enterprises were chartered by Congress with a mission to provide liquidity, stability and affordability by facilitating responsible access to mortgage credit through their activities in the secondary market,” she said. “To achieve this mission the Enterprises charge fees to compensation them for guaranteeing borrowers’ mortgage payment, which in turn attracts investors across the globe to provide liquidity for the US mortgage market, and ultimately reduces interest rates for homeowners.”