Fannie Mae - Federal National Mortgage Association

12/08/2023 | Press release | Distributed by Public on 12/08/2023 14:31

Low Balance Lending Economics: The Role of the Spec Pay-up

Single-Family Business

Helping lenders serve homebuyers and homeowners with affordable mortgages

Multifamily Business

Financing for quality, affordable rental housing in every market, every day

Capital Markets

Reducing risk and enhancing housing finance liquidity

Manage Financial Uncertainty

All Resources to Manage Financial Uncertainty

Help for Homeowners

Help for Renters

Protect Yourself from Fraud

Recover from a Disaster

All Resources for Recovering from a Disaster

Recovery Assistance for Homeowners

Recovery Assistance for Renters

Protect Yourself from Fraud

Fannie Mae's Economics and Strategic Research and Single-Family Capital Markets teams published a working paper introducing a new methodology that estimates and decomposes lender revenue for Fannie Mae guaranteed loans. Leveraging unique data, the authors reveal noteworthy insights into the relationship between individual loan economics and lender behavior. Among the new insights, the paper illustrates that the specified pay-up is critical to improving the economics of lower balance loans for lenders, which in turn improves access to credit for underserved borrowers. This market-based dynamic highlights how investor interests can support access to homeownership for underserved borrowers and families.

Low Balance Lending Economics: The Role of the Spec Pay-up (PDF)