How the US is subsidizing high-risk homebuyers

[Anonymous]

I would like to hear from anyone who thinks this is a good idea.

Even Obama's top housing advisor, David Stevens, is shocked....
“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.”

How the US is subsidizing high-risk homebuyers — at the cost of those with good credit

A little-noticed revamp of federal rules on mortgage fees will offer discounted rates for home buyers with riskier credit backgrounds — and force higher-credit homebuyers to foot the bill, The Post has learned.

Fannie Mae and Freddie Mac will enact changes to fees known as loan-level price adjustments (LLPAs) on May 1 that will affect mortgages originating at private banks nationwide, from Wells Fargo to JPMorgan Chase, effectively tweaking interest rates paid by the vast majority of homebuyers.

The result, according to industry pros: pricier monthly mortgage payments for most homebuyers — an ugly surprise for those who worked for years to build their credit, only to face higher costs than they expected as part of a housing affordability push by the US Federal Housing Finance Agency.

“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.

https://nypost.com/2023/04/16/how-the-us-is-subsidizing-high-risk-homebuyers-at-the-cost-of-those-with-good-credit/

[Anonymous]

What drivel. Your credit score still nets you a benefit or penalty depending on your score despite the hyperbole that “my credit score is a negative now”…it’s not. It’s not true that your credit score is a negative.

[Anonymous]

Meh, not as bad as subsidizing known flood plains. At least there's an asset on collateral for this.

[Anonymous]

This is what happens when you place equity above all.

Can't reward hard work any more.

[jsteele]

I just read through the article to which the original poster linked and I believe the change is being mischaracterized. I can understand why some people would be upset, but I think this is being spun more negatively than is necessary. Under current rules, those with high credit scores and large down payments pay significantly lower rates than those with lower credit scores and smaller down payments. That, of course, is reasonable. Under the new rules, the same will be true. The difference is that the difference between the rates will be decreased. Those with high credit scores will get a slightly higher rate than what was previously available and those with lower credit scores will get a slightly lower rate than previously. But, those with high credit scores and large down payments still get significant cost savings compared to those in the opposite situation.

I have no idea what a "fair" interest rate. Maybe the old rates were fair or maybe they were biased toward the wealthy. Maybe the opposite is true. As I said, I don't know. But, I suspect most others don't know either. But, the bottom line is that nobody is being punished for having a high credit score. They are still getting a significant advantage.

[Anonymous]

I don’t know if it’s a good idea or not yet, but I do hear plenty of kids at our FCPS school why should they work so hard when there isn’t any reward. I was quite shocked because I think learning is its own reward, but these kids say working hard isn't worth it.

[jsteele]

Anonymous wrote:This is what happens when you place equity above all.

Can't reward hard work any more.

This is actually what happens when you don't read past the headlines. While reading the entire article is not "hard work", it does appear to be more than you are willing to do.

[Anonymous]

jsteele wrote:I just read through the article to which the original poster linked and I believe the change is being mischaracterized. I can understand why some people would be upset, but I think this is being spun more negatively than is necessary. Under current rules, those with high credit scores and large down payments pay significantly lower rates than those with lower credit scores and smaller down payments. That, of course, is reasonable. Under the new rules, the same will be true. The difference is that the difference between the rates will be decreased. Those with high credit scores will get a slightly higher rate than what was previously available and those with lower credit scores will get a slightly lower rate than previously. But, those with high credit scores and large down payments still get significant cost savings compared to those in the opposite situation.

I have no idea what a "fair" interest rate. Maybe the old rates were fair or maybe they were biased toward the wealthy. Maybe the opposite is true. As I said, I don't know. But, I suspect most others don't know either. But, the bottom line is that nobody is being punished for having a high credit score. They are still getting a significant advantage.

Where is the cost savings?

[Anonymous]

How did the high risk buyers become less risky? Most likely by screwing the low risk buyer by forcible packaging their mortgage with high risk buyers. How about we package politician mortgage with high risk buyer instead. Let these clowns pay for there own shit ideas instead of stealing from low risk buyers.

[Anonymous]

I don’t know if it’s a good idea or not yet, but I do hear plenty of kids at our FCPS school why should they work so hard when there isn’t any reward. I was quite shocked because I think learning is its own reward, but these kids say working hard isn't worth it.

This is nothing new. There were lots of kids like this in my high school 50 years ago. These are kids. There is a reason they are not allowed to drink or vote yet. Kids say and do lots of dumb stuff.

[Anonymous]

jsteele wrote:I just read through the article to which the original poster linked and I believe the change is being mischaracterized. I can understand why some people would be upset, but I think this is being spun more negatively than is necessary. Under current rules, those with high credit scores and large down payments pay significantly lower rates than those with lower credit scores and smaller down payments. That, of course, is reasonable. Under the new rules, the same will be true. The difference is that the difference between the rates will be decreased. Those with high credit scores will get a slightly higher rate than what was previously available and those with lower credit scores will get a slightly lower rate than previously. But, those with high credit scores and large down payments still get significant cost savings compared to those in the opposite situation.

I have no idea what a "fair" interest rate. Maybe the old rates were fair or maybe they were biased toward the wealthy. Maybe the opposite is true. As I said, I don't know. But, I suspect most others don't know either. But, the bottom line is that nobody is being punished for having a high credit score. They are still getting a significant advantage.

I have been searching for more information on this plan. What I did find is that this is for people who purchase or refinance after May 1.
Regardless of whether those with a high credit score and 15% or 20% down payment have an advantage already, they are still getting punished for having good credit and saving for a down payment.

Homebuyers with good credit scores will soon encounter a costly surprise: a new federal rule forcing them to pay higher mortgage rates and fees to subsidize people with riskier credit ratings who are also in the market to buy houses.
The fee changes will go into effect May 1 as part of the Federal Housing Finance Agency’s push for affordable housing, and they 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.
The new fees will apply only to Americans buying houses or refinancing after May 1.
Lenders and real estate agents say the changes will frustrate homebuyers with high credit scores and homeowners seeking to refinance because the rule punishes them for their relatively strong financial positions.

“The changes do not make sense. Penalizing borrowers with larger down payments and credit scores will not go over well,” Ian Wright, a senior loan officer at Bay Equity Home Loans in the San Francisco Bay Area, told The Washington Times in an email message. “It overcomplicates things for consumers during a process that can already feel overwhelming with the amount of paperwork, jargon, etc. Confusing the borrower is never a good thing.”
He said the rule will “cause customer-service issues for lenders and individual loan officers when a consumer won’t understand why their interest rate and fees suddenly changed.”
“I am all for the first-time buyer having a chance to get into the market, but it’s clear these decisions aren’t being made by folks that understand the entire mortgage process,” Mr. Wright said.
The new fees “will create extreme confusion as we enter the traditional spring home purchase season,” said David Stevens, a former head of the Mortgage Bankers Association who served as commissioner of the Federal Housing Administration during the Obama administration.

“This confusing approach won’t work and more importantly couldn’t come at a worse time for an industry struggling to get back on its feet after these past 12 months,” Mr. Stevens wrote in a recent social media post. “To do this at the onset of the spring market is almost offensive to the market, consumers, and lenders.”

https://www.washingtontimes.com/news/2023/apr/18/joe-biden-hike-payments-good-credit-homebuyers-sub/

[Anonymous]

Anonymous wrote:How did the high risk buyers become less risky? Most likely by screwing the low risk buyer by forcible packaging their mortgage with high risk buyers. How about we package politician mortgage with high risk buyer instead. Let these clowns pay for there own shit ideas instead of stealing from low risk buyers.

This was not something that was voted on by politicians in Congress.
It is a plan that is being enacted by the Federal Housing Finance Agency.... led by Biden-appointee Sandra Thompson.

[Anonymous]

Anonymous wrote:

Anonymous wrote:How did the high risk buyers become less risky? Most likely by screwing the low risk buyer by forcible packaging their mortgage with high risk buyers. How about we package politician mortgage with high risk buyer instead. Let these clowns pay for there own shit ideas instead of stealing from low risk buyers.

This was not something that was voted on by politicians in Congress.
It is a plan that is being enacted by the Federal Housing Finance Agency.... led by Biden-appointee Sandra Thompson.

Democratic reforms for the greater good:

Schools:
Grade inflation, ending race neutral entrance to rigorous high schools, less focus on “the correct answer” in math,teaching to the lowest common denominator keeping remedial students with advanced learners, ending standardized tests, act or Sat for colleges…anything to slide people by. Restorative justice for kids who get punched in the face rather than expulsion.

Crime:
Not removing dangerous drivers’ licenses even when they have $12,300 in speeding tickets and kill three people with their car, elevating felony shoplifting to $1,000 in California thereby de facto allowing shoplifting and encouraging organized theft and smash and grabs mobs of teens to walk in to CVS and take things without issue, criminal justice reforms like “youth Rehabiliation act” and “second look act” that allow dangerous violent criminals to have their criminal records shielded or so that murderers get out of jail early, “restorative justice” for people who have been attacked or the use of “violence interruptors” who disrupt not violence as all studies show.

Basically, yes, as a liberal I am paying attention. I’m outraged by the loss of abortion rights, but am equally shocked at these hair brained equity proposals which basically just encourage poor behavior. Democrats think they can just lax the rules raise graduation rates or to help lower incarceration rates and it is actually screwing up the nation in the long run.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:How did the high risk buyers become less risky? Most likely by screwing the low risk buyer by forcible packaging their mortgage with high risk buyers. How about we package politician mortgage with high risk buyer instead. Let these clowns pay for there own shit ideas instead of stealing from low risk buyers.

This was not something that was voted on by politicians in Congress.
It is a plan that is being enacted by the Federal Housing Finance Agency.... led by Biden-appointee Sandra Thompson.

Democratic reforms for the greater good:

Schools:
Grade inflation, ending race neutral entrance to rigorous high schools, less focus on “the correct answer” in math,teaching to the lowest common denominator keeping remedial students with advanced learners, ending standardized tests, act or Sat for colleges…anything to slide people by. Restorative justice for kids who get punched in the face rather than expulsion.

Crime:
Not removing dangerous drivers’ licenses even when they have $12,300 in speeding tickets and kill three people with their car, elevating felony shoplifting to $1,000 in California thereby de facto allowing shoplifting and encouraging organized theft and smash and grabs mobs of teens to walk in to CVS and take things without issue, criminal justice reforms like “youth Rehabiliation act” and “second look act” that allow dangerous violent criminals to have their criminal records shielded or so that murderers get out of jail early, “restorative justice” for people who have been attacked or the use of “violence interruptors” who disrupt not violence as all studies show.

Basically, yes, as a liberal I am paying attention. I’m outraged by the loss of abortion rights, but am equally shocked at these hair brained equity proposals which basically just encourage poor behavior. Democrats think they can just lax the rules raise graduation rates or to help lower incarceration rates and it is actually screwing up the nation in the long run.

Sorry I meant to tie it in to this mortgage stuff. Basically punishing savers now too. I get it a lot of poor people have bad credit preventing them from buying homes, but do we need a 2008-2009 housing crash part two? Do we want to encourage people who won’t pay loans back to get benefits over diligent savers? According to this admin, yes. Lax the rules all around apparently.

[jsteele]

Anonymous wrote:I have been searching for more information on this plan. What I did find is that this is for people who purchase or refinance after May 1.
Regardless of whether those with a high credit score and 15% or 20% down payment have an advantage already, they are still getting punished for having good credit and saving for a down payment.

They are not getting punished. Buyers with high credit scores and large down payments have an advantage now. They will continue to have an advantage after May 1. The advantage is not as big, but it is still significant.