themortgagellm™How the May 2023 LLPA redesign shifted average fees paid by FICO band
“How did the May 2023 LLPA redesign shift average LLPA paid by FICO band on Fannie purchase loans?”
Response
Comparing loan-weighted average LLPA paid on Fannie Mae purchase originations April 2023 (pre-redesign) versus May 2023 onward (post-redesign):
| FICO band | Avg LLPA, pre-redesign (Apr 2023) | Avg LLPA, post-redesign (May 2023+) | Shift (bps) |
|---|---|---|---|
| < 620 | 247.9 bps | 243.8 bps | -4.2 |
| 620-639 | 241.7 bps | 218.8 bps | -22.9 |
| 640-659 | 217.2 bps | 194.9 bps | -22.3 |
| 660-679 | 180.2 bps | 165.3 bps | -14.9 |
| 680-699 | 113.5 bps | 131.0 bps | +17.5 |
| 700-719 | 94.8 bps | 109.7 bps | +14.9 |
| 720-739 | 66.7 bps | 92.1 bps | +25.5 |
| 740-759 | 52.1 bps | 61.4 bps | +9.3 |
| 760-779 | 40.2 bps | 43.8 bps | +3.6 |
| 780+ | 26.7 bps | 32.4 bps | +5.7 |
The crossover sits at 680 FICO. Borrowers below 680 received pricing relief (4-23 bps reduction); borrowers at 680 and above paid more (4-26 bps increase). The largest increase fell on the 720-739 band, +25.5 bps.
Reading the cross-subsidy. FHFA designed the May 2023 grid as an explicit policy intervention — not a risk-based recalibration. The agency announcement in Jan 2023 (Lender Letter LL-2023-01 / Bulletin 2023-1) framed the change as supporting access to credit for lower-FICO borrowers, paid for by higher-FICO borrowers in mid-LTV cells. The data here shows that policy intent landed roughly as designed.
What it means for lenders. If you ran a 2023 production planner pre-May, your 720-739 borrower pricing now runs ~25 bps higher than the prior playbook would have suggested. Conversely, your sub-680 borrower pricing has dropped by 15-23 bps — expand outreach there. Cross-FICO-band pricing strategy materially changed as of May 1, 2023.
Caveats. The averages above are loan-weighted on the actual Fannie purchase-origination volume in each band per vintage. The 740+ tiers were further subdivided in the redesign (introducing 740-759 / 760-779 / 780+ as separate cells) where the pre-redesign grid used a single 740+ tier — we mapped the pre-redesign 740+ figure into the most directly comparable post-redesign cells. Investment property, second home, and high-balance add-on adjustments are not included; this shows base-LLPA shifts only.
Reference: Fannie LLPA Matrix in effect February 1, 2023 - April 30, 2023 vs the May 1, 2023 redesign (which has remained unchanged through the January 2026 matrix update). Freddie Exhibit 19 grids over the same window are byte-identical on the base FICO × LTV cells per the FHFA-aligned framework.