How the US is subsidizing high-risk homebuyers
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Anonymous
Anonymous
Sounds like high-risk homebuyers are being subsidized by low-risk homebuyers. |
Anonymous
Not unless the government is regulating it. Insurance prices based on the risk. |
Anonymous
Up until 2022, people who cared about abortion as a primary voting issue, mostly were pro-life. There are a lot of Democrats who vote Republican just over abortion, and don't care for Wall Street Journal editorial page capitalism and instead support unions, tariffs, welfare. |
Anonymous
Of course it is, but I earned a greater advantage by working for it. Do I not deserve what I earned? Why does anyone deserve part of what I earned vs earning it themselves? |
Anonymous
You still get more for working more. That’s the point that matters to you and yet you are still not happy even when getting that. You are just a bitter person who wants to punish others who made different choices or faced different life circumstances than you. Having good credit isn’t exactly rocket science or some special moral achievement. |
Anonymous
Then why don’t they have good credit? |
Anonymous
It's an indication that people repay their debts as agreed and don't take on excessive debt. Those are the people I prefer to lend to. |
Anonymous
Using the word "advantage" in this discussion is misleading and a bit dishonest, especially in the manor you are using it to avoid criticism of this new direction. People with high credit scores and bigger down payments aren't in any sort of competition with anyone, so using the word "advantage" is just misleading. People are absolutely being punished. There is no competition. That would be like saying that if you earn over $100k now you will be taxed an additional 10% and that will be given to folks who make less than $50k, but to not worry because you haven't been hurt since you still make more than them. |
Anonymous
| it’s a semi wealth tax. |
Anonymous
| Let’s just put a checkbox on mortgage loans and all of the people that think it’s a good idea can simply check the box and donate to those that don’t have a good credit |
Anonymous
20 years ago, my father was supposed to have me on his insurance as part of the divorce agreement. He put the wrong birthdate. Multiple charges from an outpatient GYN procedure I had were put on my credit because they weren't paid. Mostly because my Dad kept telling me he would update the insurance and it would get re-submitted and then he lost his job. I didn't have 2000 to pay and it was already in collections by the time he lost his job even though I told the office that it was being resubmitted. That stayed on for 7 years and I had no credit cards so nothing to balance it out. Then had student loans which carry a large balance and it took probably 10 years for me to get a better score by regularly paying my student loans, opening up credit cards, etc. I also agree that the new regs are being mischaracterized. 1. upfront fees for loans backed by Fannie Mae and Freddie Mac will be adjusted because of changes in the Loan Level Price Adjustments (LLPAs), the fees that vary from borrower to borrower based on their credit scores, down payments, types of home and more. The changes relate to credit scores and downpayment sizes. fees can significantly reduce the % of downpayment applied and the small the downpayment the higher the PMI causing a higher mortgage payment, PMI is a sliding scale and at 15-20% is less and can be refinanced once the 20% threshold is crossed correct? and sometimes these fees are rolled into the interest rate/points when we already have increased interest rates due to inflation 2. The entire matrix of fees based on credit score and down payment has been updated. If you have a top credit score, you’ll still pay less than if you have a low credit score. 3. Fannie Mae's and Freddie Mac’s share of the mortgage market comprised nearly 60% of all new mortgages meaning if you are so inclined you don't have to use FM and can avoid this issue entirely 4. Housing Finance Agency also plans a fee on August 1 for borrowers with at least a 40% debt-to-income ratio and 60% loan-to-value ratio, calculated by how large your loan is compared with the value of your home.My understanding is that this is to balance the risk of the low-moderate homeowner from taking out too large a loan in comparison to the house and/or their income trying to offset becoming overleveraged 5. I also remember reading that the agency wants to increase fees for jumbo loans and non-primary mortgages but that was not included in these changes High-credit borrowers are still paying less than the lower-credit borrowers. You are paying more compared to 6 weeks ago but you arent paying more than a lower-credit borrower. Credit scores are also more of an indicator of your ability to bounce back from financial distress if you even have a credit score at all considering a large portion of the population doesn't have a credit score, not because they don't make payments but because they don't take out loans. And you cant talk about credit scores without talking about wealth inequality. The whole point that some people continue to make is that if people can afford to rent, which is usually higher than a mortgage payment, then they can afford a home except for all of the fees and downpayment requirement hurdles because those require long-term ability to horde capital. Even if you dont get a DP from mommy and daddy, if your college was paid for or your car was paid for or you can live at home, etc. you are still able to accrue more capital compared to someone who had to take out student loans or car loan, etc. I think that taken in combination with the Aug 1st fee for income-to-debt ratio and loan-to-value that it is encouraging lower loan amounts and rural, LCOL purchases. "Researchers suggest that instead of using past behavior (that might stretch back several years or more) to predict future repayment behavior, credit scoring models should also look at cash flow and payment history on rent and utilities. Cash-flow underwriting is based on how much money is in your bank account each day over the year. FinReg Labs, a nonprofit data testing center, analyzed cash-flow underwriting and the results showed that head-to-head it was more predictive than traditional FICO scoring. Their analysis also showed that using both the FICO score and cash-flow underwriting together offered the most accurate predictive model. “What makes cash-flow underwriting an improvement on current models is that it’s about their current status, not their past. Credit scoring is great at showing financial distress, such as divorce, which is felt more in incomes of color,” Klein says." |
Anonymous
Because they don’t have enough money. |
Anonymous
I really do appreciate the effort that went into this, but none of what you wrote addresses the fact a fee meant to compensate the government for risk is being reallocated from the riskiest borrowers to the less risky borrowers. UNLESS you can demonstrate that the original fee structure was poorly underwritten and resulted in risky borrowers subsidizing the risk posed by less risky borrowers, these new regs are not being mischaracterized. LLPAs were specifically introduced to reduce the likelihood of a repeat of the 2008 housing crash. LLPAs we’re meant to act as a sort of schmuck insurance that prevented brokers from just shoveling mispriced risk into the GSEs. LLPAs are part of the tool kit that has made the financial system more resilient. The new regs are now backing out or mitigating the effect of LLPAs and moving the cost of risk away from risky borrowers to safer borrowers. Do this enough and you end up with low income borrowers in California buying $700k homes. |
Anonymous
You don't need money to have good credit unless you are overextending yourself, and at that point, shouldnt be buying a house |