LLPA is where the lender imposes additional charges/costs based on your personal risk traits. These charges are set by Fannie Mae and Freddie Mac and were first introduced in April 2008. They have expanded the risks and charges for those risks over the past 2 years.

For most consumers, LLPA isn't on the front page of the paper or talked about much in the news. And for the most part, it is never mentioned in those "low rates" announcements you here on the radio. So how is a consumer to understand LLPA? Think of auto insurance.

You can buy the same car as your neighbor but pay a higher premium. Why? Because your record has a speeding ticket. Or maybe you are a young driver with little experience.  Now think of the car insurance as mortgage rates. If you have credit that has blemished (aka speeding tickets), you may pay a higher rate (or fees). Maybe you have little credit (young driver) so your credit scores are lower, you will pay a higher rate or higher fees. You are putting down less money which is providing a greater risk to the Lender (drive a riskier car), you may pay a higher rate or fees. The more risk the higher the rate or fees.

The loan professional will determine what fees are imposed for your particular situation and then provide you with the option of paying those fees as additional closing costs or increasing your rate in lieu of paying the fees; the choice is always yours! Most typically the consumer elects the higher rate as the fees can add up quickly.

 LLPA is a mandatory cost based on risk factors for each individual; they are not junk fees or "padding" by the Lender. If you have questions on Fannie Mae Loan-Level Pricing Adjustments, please be sure to give me a call at 509.232.7725 or shoot an email to dgeibel@cascademortgagewa.com.