A new federal Biden rule will force homebuyers with good credit scores to pay higher mortgage rates and fees so they can subsidize people with riskier credit ratings who want to buy a home.
It’s wealth redistribution and will be a disaster since risky homebuyers usually default. The feds will also temporarily ignore lenders’ debt-to-income ratio. It determines if homebuyers can afford to pay their mortgages each month.
The fees are allegedly minimal for now, but you know how that goes.
The fee changes will go into effect May 1 as part of the Federal Housing Finance Agency’s push for affordable housing for risky buyers.
This will affect mortgages originating at private banks across the country. The federally backed home mortgage companies Fannie Mae and Freddie Mac will enact the loan-level price adjustments or LLPAs.
Mortgage industry specialists say homebuyers with credit scores of 680 or higher will pay, for example, about $40 per month more on a home loan of $400,000. Homebuyers who make down payments of 15% to 20% will get socked with the largest fees, reports The Washington Times.
If you worked hard to build up good credit, you will pay more so you. can pay for people who built up bad credit.
“It’s going to be a challenge trying to explain to somebody that says, ‘I worked my whole life for high credit, and I’ve put a lot of money down, and you’re telling me that’s a negative now?’ That’s a hard conversation to have,” one worried Arizona-based mortgage loan originator told The Post.
“It’s unprecedented,” added David Stevens, who served as Federal Housing Administration commissioner during the Obama administration. “My email is full from mortgage companies and CEOs [telling] me how unbelievably shocked they are by this move.”
“This was a blatant and significant cut of fees for their highest-risk borrowers and a clear increase in much better credit quality buyers – which just clarified to the world that this move was a pretty significant cross-subsidy pricing change,” said Stevens, who is also the former CEO of the Mortgage Bankers Association.
Stevens says they’re trying to narrow the gap for minority home buyers [through socialism], but when interest rates go back down, home prices will go up, there will be more homebuyers, and the gap will persist. This does not solve the problem.
However, it certainly is unfair.