INSIDE INFORMATION
INSIDE INFORMATION
COMPILED BY DANICA LLOYD
2023 HOME EDITION
UNDERSTANDING MUNICIPAL UTILITY DISTRICTS
DID YOU KNOW? Texas has several other types of districts that provide services, including water control and improvement districts, which can levy taxes; special utility districts, which cannot; and river authorities, which typically cannot levy taxes but may issue bonds. MUDs may be converted into limited districts by annexing to a city. How do MUD nances work? To nance the construction of infrastructure in a district, MUDs have the ability to issue bonds to raise funds. They may also impose property taxes on residents to pay for operations and maintenance as well as to repay bond debt.
For more than 50 years, subdivisions and other developments throughout Texas have been created through the formation of municipal utility districts. Developers typically establish MUDs in undeveloped areas outside the jurisdiction of existing city or county governments. MUDs may also be formed within a city’s boundaries to provide infrastructure.
WHAT IS AN LLPA?
WHAT'S NEW?
WHY DO THEY EXIST?
A loan-level price adjustment is a risk-based fee applied to mortgage loans. They were introduced nationally following the 2008 housing crisis and are calculated based on loan traits such as:
LLPAs are designed to ensure the price of a mortgage loan re ects the borrower’s level of risk. For example, a borrower with a credit score of 660 will be subject to higher LLPA fees than one with a credit score of 720.
As of May 1, LLPAs were reduced for low-credit borrowers and were slightly increased for those with good credit. While the gap between what low- and high-credit borrowers pay has gotten smaller, FHFA Director Sandra Thompson said in a news release it’s important to note that high-credit borrowers will still pay less than low-credit borrowers. These changes resulted from a comprehensive review of Fannie Mae and Freddie Mac’s pricing framework in 2021. One of the objectives of this review was to “maintain support for purchase borrowers limited by income or wealth,” according to the release.
COMPILED BY GRANT CRAWFORD
The Federal Housing Finance Agency recently implemented changes to the loan-level price adjustment structure to help improve housing a ordability in the U.S. LLPAs are based on the borrower’s level of risk and allow higher fees to be applied to mortgage prices for riskier borrowers without penalizing less risky borrowers. SOURCES: FANNIE MAE, FREDDIE MAC, FEDERAL HOUSING FINANCE AGENCY COMMUNITY IMPACT
Borrower’s credit score
Loan-to- value ratio
CREDIT SCORE: 660 HIGHER FEES
CREDIT SCORE: 720 LOWER FEES
What do MUDs provide? As a special-use district, MUDs are government entities that can provide a variety of essential utility services and infrastructure, including:
How are MUDs formed? Developers may petition the Texas Legislature or the Texas Commission on Environmental Quality to create a MUD.
Loan purpose Loan term Occupancy Number of units Property type
Low-credit borrowers often face higher interest rates or upfront charges so lenders can better manage their risk and the mortgage market is more balanced.
If the property is located within a city’s jurisdiction, the city must authorize the creation of the MUD. If a city does not give its consent within 90 days, state statute allows for an additional 120 days for the parties to negotiate terms for services.
NOTE: LLPAS ARE PRIMARILY USED FOR CONVENTIONAL MORTGAGE LOANS. THEY DO NOT APPLY TO EVERYONE PURCHASING A HOME.
Other nancial sources include:
Wastewater treatment
Solid waste management
Water supply
Utility fees on residents and businesses within the MUD’s boundaries
Loan-to-value ratio (mortgage amount ÷ appraised value)
CREDIT SCORE ≤ 30% 30.01-60% 60.01-70% 70.01-75% 75.01-80% 80.01-85% 85.01-90% 90.01-95% >95% ≥ 780 0% 0% 0% 0% 0.375% 0.375% 0.25% 0.25% 0.125% 760-779 0% 0% 0% 0.25% 0.625% 0.625% 0.5% 0.5% 0.25% 740-759 0% 0% 0.125 0.375% 0.875% 1% 0.75% 0.625% 0.5% 720-739 0% 0% 0.25% 0.75% 1.25% 1.25% 1% 0.875% 0.75% 700-719 0% 0% 0.375% 0.875% 1.375% 1.5% 1.25% 1.125% 0.875% 680-699 0% 0% 0.625% 1.125% 1.75% 1.875% 1.5% 1.375% 1.125% 660-679 0% 0% 0.75% 1.375% 1.875% 2.125% 1.75% 1.625% 1.25% 640-659 0% 0% 1.125% 1.5% 2.25% 2.5% 2% 1.875% 1.5% ≤ 639 0% 0.125% 1.5% 2.125% 2.75% 2.875% 2.625% 2.25% 1.75%
This table shows LLPA fees for purchase money loans based on the borrower’s credit score and loan- to-value ratio. These fees are typically added to the closing costs of a mortgage.
Impact fees levied on new developments occurring within the district’s boundaries
If 120 days pass with no agreement, developers can initiate proceedings with the TCEQ by:
Drainage systems
Parks and recreation facilities
Road facilities
1 Filing a petition with the TCEQ to form a MUD.
Who governs MUDs? Municipal utility districts are governed by a board of directors who are responsible for overseeing operations and making decisions for the MUD. The board is elected by the residents who reside within the district. The board has the authority to enter into contracts and agreements with service providers and other entities.
Grants and loans from federal, state and local governments to pay for construction projects and infrastructure improvements
Receiving approval from the TCEQ after a review period to ensure legal requirements are met and essential services will be provided.
2
Increased fees Decreased fees
3 Receiving approval from voters who live within the proposed district.
SOURCES: CITY OF AUSTIN, CITY OF GEORGETOWN, TEXAS COMMISSION ON ENVIRONMENTAL QUALITY COMMUNITY IMPACT
Che s to Savings! ®
BRODIE LANE 4970 Hwy 290 W (512) 366-8260 BEE CAVE 13015 Shops Pkwy (512) 263-9981
SOUTHPARK MEADOWS 9900 IH-35 Service Road S (512) 280-7400 DRIPPING SPRINGS
166 Hargraves (512) 432-0186
Store selections vary. Sale ends 8/31/2023. Photos for illustration only. Not responsible for typographical errors. SPECSONLINE.COM
Offering Curbside, In-Store Pickup & Delivery
Powered by FlippingBook