Hike in payments for good-credit homebuyers to subsidize high-risk mortgages

[Anonymous]

Also it’s extremely misleading (but typical in right wing media) not to make clear that this affects only FHA loans, not the conventional mortgages that most buyers with good credit have.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I... don't understand the policy reason behind this?

I had mediocre credit (600 score) when we bought our current home and we wound up with a higher rate as a result. We also only had 10% down, which also impacted our rate. But I've worked incredibly hard for almost 15 years to improve my credit and sock away money, plus we've never missed a mortgage payment (including all our PMI payments since we were putting down less than 20%), and you're saying that because I now have a 800+ credit score and have worked diligently for two decades in order to save money and build equity, I now have to pay more money in order to help people who are now in the exact same situation I was in 15 years ago?

I don't understand. I did exactly what I was told I needed to do. Why am I the one being asked to help?

So far, you have two right wing sources reporting this as a horrific charge to hardworking people while those with lower credit scores get off scot free. And their sources (at least the NY Post) are people in the mortgage banking industry. Shocker.

In reality. admitted in the last paragraph or so of the article, it's a balancing exercise and buyers with lower credit scores will still pay higher fees, just not as high as before.

"Overall, lower-credit buyers will still pay more in LLPA fees than high-credit buyers – but the latest changes will close the gap.

The official said the LLPA changes will result in an average price hike of just three to four basis points, or 0.03% to 0.04%, across the spectrum of mortgage recipients – the equivalent of a few dollars per month."

Right wing sources? I posted the FHFA links on like post 5. Did you actually read them?

The FHFA link does NOT show that good credit scores are paying higher rates than bad credit scores.

The article was click bait.

Bad credit scores are paying higher rates than good credit scores, however it seems from May 1st, the gap will narrow somewhat, i.e. those with bad credit score with pay very very slightly lower rates, and those with good credit scores will pay very very slightly higher rates. Is one at the expense of the other? Who knows, but don't think the article is click bait. In the end, those with bad credit scores will still overall pay higher rates than those with good credit scores, again, the gap will narrow somewhat.

[Anonymous]

Anonymous wrote:Also it’s extremely misleading (but typical in right wing media) not to make clear that this affects only FHA loans, not the conventional mortgages that most buyers with good credit have.

I think both sides tend to mislead when they want to, don't you think so?

[Anonymous]

Anonymous wrote:Excuse me while I go tank my credit

There are other things you need good credit for besides buying a home lol

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can someone help me understand this in a neutral, nonpolitical way?

Is this accurate?

The mortgage companies need to raise a certain amount of money through fees. Before, people with lower credit scores were charged nearly all of the money needed. Now, the charges are more even, and the people with higher credit scores will pay a higher percentage than the people with lower credit scores.

No. That is not correct.

First, if you are getting a conventional loan this does not affect you.

If you are getting a FHA loan, there are fees.

People with good credit scores paid insanely low fees, people with bad scores paid insanely high fees. These fees did not relate in any way to actual risk,

People with good credit scores will still pay very low fees perhaps 1% vs .25%, people with lower credit scores will pay reasonable fees, perhaps 2.5% instead of 4%.

People with good credit are still paying lower fees than people with bad credit.

If you have a good credit score you probably don’t need and FHA loan you probably will qualify for a conventional mortgage and this will not affect you.

What are the fees for? To process the loan? To offset to risk of default? If it is for processing, the fee should be proportional to the loan amount. If it is for offset the future defaults, people with higher credit shouldn’t be paying for it.

FHA loans have always been laden with fees. Why? Because if you have a crappy credit score and a low downpayment, an FHA loan is pretty much the only loan you’ll qualify for. FHA loans are handed out like tic-tacs. FHA loans also require strict inspections and habitability repairs paid-for by the home seller, because the expectation is that the buyer won’t be able to afford the repairs.

In short, FHA loans are expensive for the government to underwrite so the fees help offset the risk.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Communism

more like socialism

This is a government program to help very private banks protect their very private profits. You can hate communism and socialism but that should involve knowing what they are, or at least what they aren’t.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Communism

more like socialism

This is a government program to help very private banks protect their very private profits. You can hate communism and socialism but that should involve knowing what they are, or at least what they aren’t.

NP. I think the pp’s point is that banks should be charging the risky people fees to offset their risky mortgages and protect their own private profits that way. Interest rates and fees have always been a function of risk since that’s how the banks protect their investments. It shouldn’t be responsible people paying more fees for this, even if risky people still pay fees as well like they should.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Also it’s extremely misleading (but typical in right wing media) not to make clear that this affects only FHA loans, not the conventional mortgages that most buyers with good credit have.

I think both sides tend to mislead when they want to, don't you think so?

These days, the right wing media is trading in misinformation much more so than the left wing media. Just ask Dominion and Fox.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Also it’s extremely misleading (but typical in right wing media) not to make clear that this affects only FHA loans, not the conventional mortgages that most buyers with good credit have.

I think both sides tend to mislead when they want to, don't you think so?

No

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Communism

more like socialism

This is a government program to help very private banks protect their very private profits. You can hate communism and socialism but that should involve knowing what they are, or at least what they aren’t.

NP. I think the pp’s point is that banks should be charging the risky people fees to offset their risky mortgages and protect their own private profits that way. Interest rates and fees have always been a function of risk since that’s how the banks protect their investments. It shouldn’t be responsible people paying more fees for this, even if risky people still pay fees as well like they should.

But the “less risky” were being subsidized by the “more risky”, now the fees are based on risk instead of being arbitrary or based on the area like “urban” which does not have a higher risk.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I... don't understand the policy reason behind this?

I had mediocre credit (600 score) when we bought our current home and we wound up with a higher rate as a result. We also only had 10% down, which also impacted our rate. But I've worked incredibly hard for almost 15 years to improve my credit and sock away money, plus we've never missed a mortgage payment (including all our PMI payments since we were putting down less than 20%), and you're saying that because I now have a 800+ credit score and have worked diligently for two decades in order to save money and build equity, I now have to pay more money in order to help people who are now in the exact same situation I was in 15 years ago?

I don't understand. I did exactly what I was told I needed to do. Why am I the one being asked to help?

So far, you have two right wing sources reporting this as a horrific charge to hardworking people while those with lower credit scores get off scot free. And their sources (at least the NY Post) are people in the mortgage banking industry. Shocker.

In reality. admitted in the last paragraph or so of the article, it's a balancing exercise and buyers with lower credit scores will still pay higher fees, just not as high as before.

"Overall, lower-credit buyers will still pay more in LLPA fees than high-credit buyers – but the latest changes will close the gap.

The official said the LLPA changes will result in an average price hike of just three to four basis points, or 0.03% to 0.04%, across the spectrum of mortgage recipients – the equivalent of a few dollars per month."

Right wing sources? I posted the FHFA links on like post 5. Did you actually read them?

The FHFA link does NOT show that good credit scores are paying higher rates than bad credit scores.

The article was click bait.

Bad credit scores are paying higher rates than good credit scores, however it seems from May 1st, the gap will narrow somewhat, i.e. those with bad credit score with pay very very slightly lower rates, and those with good credit scores will pay very very slightly higher rates. Is one at the expense of the other? Who knows, but don't think the article is click bait. In the end, those with bad credit scores will still overall pay higher rates than those with good credit scores, again, the gap will narrow somewhat.

It is click bait because it was written to purposely mislead.

Some actually think ranking their credit score will get them lower fees.

That person, of course, never came back and said oh thank goodness the article is a sham now I understand.

A few thoughtful people asked for an explanation.

The lemmings just fell for it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Can someone help me understand this in a neutral, nonpolitical way?

Is this accurate?

The mortgage companies need to raise a certain amount of money through fees. Before, people with lower credit scores were charged nearly all of the money needed. Now, the charges are more even, and the people with higher credit scores will pay a higher percentage than the people with lower credit scores.

No. That is not correct.

First, if you are getting a conventional loan this does not affect you.

If you are getting a FHA loan, there are fees.

People with good credit scores paid insanely low fees, people with bad scores paid insanely high fees. These fees did not relate in any way to actual risk,

People with good credit scores will still pay very low fees perhaps 1% vs .25%, people with lower credit scores will pay reasonable fees, perhaps 2.5% instead of 4%.

People with good credit are still paying lower fees than people with bad credit.

If you have a good credit score you probably don’t need and FHA loan you probably will qualify for a conventional mortgage and this will not affect you.

What are the fees for? To process the loan? To offset to risk of default? If it is for processing, the fee should be proportional to the loan amount. If it is for offset the future defaults, people with higher credit shouldn’t be paying for it.

I thought the fees were part of what would be considered a conforming loan (i.e. eligible to be purchased by Freedie and Fannie)



https://singlefamily.fanniemae.com/media/9391/display

[Anonymous]

This helps the rich more than the poor.

[Anonymous]

Anonymous wrote:I think this article does a better job: https://nypost.com/2023/04/16/how-the-us-is-subsidizing-high-risk-homebuyers-at-the-cost-of-those-with-good-credit/

and you can see the fee table here:

Fee table and other info is a link in the article https://singlefamily.fanniemae.com/media/9391/display
Fannie Mae LLPA waivers:
HomeReady® loans 900
Loans to first-time homebuyers with qualifying income ≤100% area median income (AMI) or 120% AMI in high-cost areas NA
Loans meeting Duty to Serve requirements
(Purchase and limited cash-out refinances, principal residences with total qualifying income ≤100% AMI)
• Manufactured housing including MH Advantage®
• Rural housing - loans in high needs rural regions
• Loans to Native Americans on tribal lands
• Loans originated by “small financial institutions”
• Affordable housing preservation loans – loans financing ENERGY STAR® certified improvements, loans with
shared equity

120% Area medium income for 1 in DC might be over 110k and for 4 over 150k. So I found a 2020 list of what were the official small financial institutions- that was over 8000 originators. Scroll down and you ca click on the link https://www.fhfa.gov/DataTools/Downloads/Pages/Duty-to-Serve-Eligibility-Data.aspx

[Anonymous]

Anonymous wrote:

Anonymous wrote:Can someone help me understand this in a neutral, nonpolitical way?

Is this accurate?

The mortgage companies need to raise a certain amount of money through fees. Before, people with lower credit scores were charged nearly all of the money needed. Now, the charges are more even, and the people with higher credit scores will pay a higher percentage than the people with lower credit scores.

No. That is not correct.

First, if you are getting a conventional loan this does not affect you.

If you are getting a FHA loan, there are fees.

People with good credit scores paid insanely low fees, people with bad scores paid insanely high fees. These fees did not relate in any way to actual risk,

People with good credit scores will still pay very low fees perhaps 1% vs .25%, people with lower credit scores will pay reasonable fees, perhaps 2.5% instead of 4%.

People with good credit are still paying lower fees than people with bad credit.

If you have a good credit score you probably don’t need and FHA loan you probably will qualify for a conventional mortgage and this will not affect you.

No. That is not correct. The fees absolutely reflect risk.

You are also conflating FHA and FHFA.

FHFA sets the fees for Fannie and Freddie, who guarantee conventional mortgages.

To answer the "why" question above, FHFA is doing this to make it easier (cheaper) for first-time and low/moderate income borrowers to be able to get a mortgage. It's an equity play. They are very upfront about it.