How the US is subsidizing high-risk homebuyers

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

jsteele wrote:

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

The advantage is not as big, because part of that advantage goes to the one that did not work for it. No matter how you spin it, it stinks for those that do the right thing.

If you have $1,000 in the bank, and I have $100, you have a $900 advantage. Let’s take $100 from you and give it to me, you still have an $800 advantage, so it’s fine right?

Is $800 not an advantage worth working for? If things are so easy for irresponsible people then why are you still paying your mortgage every month? Oh yeah because there is an actual advantage to being responsible despite your hyperbole.

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?

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.

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.

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."

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.

Not if they cant afford it...that's a ridiculous assumption. See also the additional fees they wanted to add but banks freaked TF about it even though it is just as reasonable of a fee and it actually attacks the issue of not being able to afford your mortgage. Higher DTI are usually denied mortgages.

And you refuse to address the fact that credit is not the only indicator of creditworthiness. Your definition of risky is flawed when it's based on credit scores as suggested in the latter part of my post. Credit scores don't take into account rental and utility history. You cant get delinquencies or repeat submissions removed from the credit agencies. They have no one who manages them or deals with them since they are independent. Meaning that if Discover categorizes you as late because of some flaw in the reporting system and your credit score goes down, its down for 7 years. And you have no way to get it removed, even if you report it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

jsteele wrote:

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

The advantage is not as big, because part of that advantage goes to the one that did not work for it. No matter how you spin it, it stinks for those that do the right thing.

If you have $1,000 in the bank, and I have $100, you have a $900 advantage. Let’s take $100 from you and give it to me, you still have an $800 advantage, so it’s fine right?

Is $800 not an advantage worth working for? If things are so easy for irresponsible people then why are you still paying your mortgage every month? Oh yeah because there is an actual advantage to being responsible despite your hyperbole.

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?

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.

Then why don’t they have good credit?

Because they don’t have enough money.

You don't need money to have good credit unless you are overextending yourself, and at that point, shouldnt be buying a house

Yes actually it is a specific requirement of good credit that you had money to spend in the first place. Think for a second before spouting off complete nonsense.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

jsteele wrote:

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

The advantage is not as big, because part of that advantage goes to the one that did not work for it. No matter how you spin it, it stinks for those that do the right thing.

If you have $1,000 in the bank, and I have $100, you have a $900 advantage. Let’s take $100 from you and give it to me, you still have an $800 advantage, so it’s fine right?

Is $800 not an advantage worth working for? If things are so easy for irresponsible people then why are you still paying your mortgage every month? Oh yeah because there is an actual advantage to being responsible despite your hyperbole.

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?

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.

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.

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."

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.

Not if they cant afford it...that's a ridiculous assumption. See also the additional fees they wanted to add but banks freaked TF about it even though it is just as reasonable of a fee and it actually attacks the issue of not being able to afford your mortgage. Higher DTI are usually denied mortgages.

And you refuse to address the fact that credit is not the only indicator of creditworthiness. Your definition of risky is flawed when it's based on credit scores as suggested in the latter part of my post. Credit scores don't take into account rental and utility history. You cant get delinquencies or repeat submissions removed from the credit agencies. They have no one who manages them or deals with them since they are independent. Meaning that if Discover categorizes you as late because of some flaw in the reporting system and your credit score goes down, its down for 7 years. And you have no way to get it removed, even if you report it.

That is irrelevant to the changes being introduced, which charge lower rates for low credit score borrowers than before, and higher rates than before for high credit score borrowers.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

jsteele wrote:

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

The advantage is not as big, because part of that advantage goes to the one that did not work for it. No matter how you spin it, it stinks for those that do the right thing.

If you have $1,000 in the bank, and I have $100, you have a $900 advantage. Let’s take $100 from you and give it to me, you still have an $800 advantage, so it’s fine right?

Is $800 not an advantage worth working for? If things are so easy for irresponsible people then why are you still paying your mortgage every month? Oh yeah because there is an actual advantage to being responsible despite your hyperbole.

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?

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.

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.

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."

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.

Not if they cant afford it...that's a ridiculous assumption. See also the additional fees they wanted to add but banks freaked TF about it even though it is just as reasonable of a fee and it actually attacks the issue of not being able to afford your mortgage. Higher DTI are usually denied mortgages.

And you refuse to address the fact that credit is not the only indicator of creditworthiness. Your definition of risky is flawed when it's based on credit scores as suggested in the latter part of my post. Credit scores don't take into account rental and utility history. You cant get delinquencies or repeat submissions removed from the credit agencies. They have no one who manages them or deals with them since they are independent. Meaning that if Discover categorizes you as late because of some flaw in the reporting system and your credit score goes down, its down for 7 years. And you have no way to get it removed, even if you report it.

I'll add on that people like to pretend that the 2008 crash happened because lending standards were relaxed just a little bit when the truth is that lending standards were largely done away with altogether. So let's not pretend that the problem was just people with low credit scores that had conventional loans with 20% down. And those borrowers still pay hefty fees compared to those with the highest credit scores.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

jsteele wrote:

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

The advantage is not as big, because part of that advantage goes to the one that did not work for it. No matter how you spin it, it stinks for those that do the right thing.

If you have $1,000 in the bank, and I have $100, you have a $900 advantage. Let’s take $100 from you and give it to me, you still have an $800 advantage, so it’s fine right?

Is $800 not an advantage worth working for? If things are so easy for irresponsible people then why are you still paying your mortgage every month? Oh yeah because there is an actual advantage to being responsible despite your hyperbole.

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?

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.

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.

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."

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.

Not if they cant afford it...that's a ridiculous assumption. See also the additional fees they wanted to add but banks freaked TF about it even though it is just as reasonable of a fee and it actually attacks the issue of not being able to afford your mortgage. Higher DTI are usually denied mortgages.

And you refuse to address the fact that credit is not the only indicator of creditworthiness. Your definition of risky is flawed when it's based on credit scores as suggested in the latter part of my post. Credit scores don't take into account rental and utility history. You cant get delinquencies or repeat submissions removed from the credit agencies. They have no one who manages them or deals with them since they are independent. Meaning that if Discover categorizes you as late because of some flaw in the reporting system and your credit score goes down, its down for 7 years. And you have no way to get it removed, even if you report it.

That is irrelevant to the changes being introduced, which charge lower rates for low credit score borrowers than before, and higher rates than before for high credit score borrowers.

Dude seriously look at the charts.

≥ = 780 0.000% 0.000% 0.000% 0.000% 0.375% 0.375% 0.250% 0.250% 0.125% N/A
760 – 779 0.000% 0.000% 0.000% 0.250% 0.625% 0.625% 0.500% 0.500% 0.250% N/A
740 – 759 0.000% 0.000% 0.125% 0.375% 0.875% 1.000% 0.750% 0.625% 0.500% N/A
720 – 739 0.000% 0.000% 0.250% 0.750% 1.250% 1.250% 1.000% 0.875% 0.750% N/A
700 – 719 0.000% 0.000% 0.375% 0.875% 1.375% 1.500% 1.250% 1.125% 0.875% N/A
680 – 699 0.000% 0.000% 0.625% 1.125% 1.750% 1.875% 1.500% 1.375% 1.125% N/A
660 – 679 0.000% 0.000% 0.750% 1.375% 1.875% 2.125% 1.750% 1.625% 1.250% N/A
640 - 659 0.000% 0.000% 1.125% 1.500% 2.250% 2.500% 2.000% 1.875% 1.500% N/A
≤ 6391 0.000% 0.125% 1.500% 2.125% 2.750% 2.875% 2.625% 2.250% 1.750%

Someone with a low credit score and < 30% loan get 0% just like the best credit score. Its a matrix of risk. All things being equal meaning purchase price, etc. means that a 400k mortgage is 0.125% for the 780 and 1.75% for the <630 at >95% LTV.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

jsteele wrote:

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

The advantage is not as big, because part of that advantage goes to the one that did not work for it. No matter how you spin it, it stinks for those that do the right thing.

If you have $1,000 in the bank, and I have $100, you have a $900 advantage. Let’s take $100 from you and give it to me, you still have an $800 advantage, so it’s fine right?

Is $800 not an advantage worth working for? If things are so easy for irresponsible people then why are you still paying your mortgage every month? Oh yeah because there is an actual advantage to being responsible despite your hyperbole.

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?

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.

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.

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."

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.

Not if they cant afford it...that's a ridiculous assumption. See also the additional fees they wanted to add but banks freaked TF about it even though it is just as reasonable of a fee and it actually attacks the issue of not being able to afford your mortgage. Higher DTI are usually denied mortgages.

And you refuse to address the fact that credit is not the only indicator of creditworthiness. Your definition of risky is flawed when it's based on credit scores as suggested in the latter part of my post. Credit scores don't take into account rental and utility history. You cant get delinquencies or repeat submissions removed from the credit agencies. They have no one who manages them or deals with them since they are independent. Meaning that if Discover categorizes you as late because of some flaw in the reporting system and your credit score goes down, its down for 7 years. And you have no way to get it removed, even if you report it.

How can it possibly be a ridiculous assumption when that’s exactly what happened in the run up to the 2008 crash?

Your definition of risk is also flawed because there is no perfect definition of risky. So I’m not sure what magical point you think you are making by pointing out that something is flawed when everything we could come up with is flawed. Even if better definitions of risky exist, credit scores alone are still an adequate starting point unless you really think that cash flow component to credit would materially alter how risk is priced. Sure, it’ll change things at the margin, but, guess what, cash flow components will overwhelmingly help those who score highly on FICO already because debt service is a function of cash flow.

And you still are ignoring the fundamental point, risk is being transferred from more risky borrowers to less risky borrowers. Conceding that FICO is an imperfect, flawed measurement, it’s still pretty damn good. And while better credit scoring would at the margins possibly blunt the credit effect of the LLPA changes, directionally, it is absolutely true that in the aggregate the changes to the LLPAs will transfer risk from riskier borrowers to less risky borrowers.

You’re arguing something akin to: since the SAT isn’t a perfect predictor of future college success, and a marginally better formula incorporating other data in addition to the SAT would be better, therefore the SAT is invalid as a predictor. That’s simply not true. Even if a better marginal predictive formula exists, it doesn’t invalidate the predictive power of the SAT.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

jsteele wrote:

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

The advantage is not as big, because part of that advantage goes to the one that did not work for it. No matter how you spin it, it stinks for those that do the right thing.

If you have $1,000 in the bank, and I have $100, you have a $900 advantage. Let’s take $100 from you and give it to me, you still have an $800 advantage, so it’s fine right?

Is $800 not an advantage worth working for? If things are so easy for irresponsible people then why are you still paying your mortgage every month? Oh yeah because there is an actual advantage to being responsible despite your hyperbole.

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?

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.

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.

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."

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.

Not if they cant afford it...that's a ridiculous assumption. See also the additional fees they wanted to add but banks freaked TF about it even though it is just as reasonable of a fee and it actually attacks the issue of not being able to afford your mortgage. Higher DTI are usually denied mortgages.

And you refuse to address the fact that credit is not the only indicator of creditworthiness. Your definition of risky is flawed when it's based on credit scores as suggested in the latter part of my post. Credit scores don't take into account rental and utility history. You cant get delinquencies or repeat submissions removed from the credit agencies. They have no one who manages them or deals with them since they are independent. Meaning that if Discover categorizes you as late because of some flaw in the reporting system and your credit score goes down, its down for 7 years. And you have no way to get it removed, even if you report it.

I'll add on that people like to pretend that the 2008 crash happened because lending standards were relaxed just a little bit when the truth is that lending standards were largely done away with altogether. So let's not pretend that the problem was just people with low credit scores that had conventional loans with 20% down. And those borrowers still pay hefty fees compared to those with the highest credit scores.

PP. This is a valid point, but systems don’t fail because all standards are loosened all at once. It starts with one small step. Do enough loosening in incremental steps and eventually you have a serious problem on your hands. The ideal is to always continue refining credit so that risks is properly priced. Directionally, looking at these changes, you have to believe that the old formula mispriced risk and subsidized prime borrowers or that the new formula is subsidizing less credit worthy borrowers. It could truly be the former, but I doubt it.

[Anonymous]

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

jsteele wrote:

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

The advantage is not as big, because part of that advantage goes to the one that did not work for it. No matter how you spin it, it stinks for those that do the right thing.

If you have $1,000 in the bank, and I have $100, you have a $900 advantage. Let’s take $100 from you and give it to me, you still have an $800 advantage, so it’s fine right?

Is $800 not an advantage worth working for? If things are so easy for irresponsible people then why are you still paying your mortgage every month? Oh yeah because there is an actual advantage to being responsible despite your hyperbole.

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?

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.

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.

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."

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.

Not if they cant afford it...that's a ridiculous assumption. See also the additional fees they wanted to add but banks freaked TF about it even though it is just as reasonable of a fee and it actually attacks the issue of not being able to afford your mortgage. Higher DTI are usually denied mortgages.

And you refuse to address the fact that credit is not the only indicator of creditworthiness. Your definition of risky is flawed when it's based on credit scores as suggested in the latter part of my post. Credit scores don't take into account rental and utility history. You cant get delinquencies or repeat submissions removed from the credit agencies. They have no one who manages them or deals with them since they are independent. Meaning that if Discover categorizes you as late because of some flaw in the reporting system and your credit score goes down, its down for 7 years. And you have no way to get it removed, even if you report it.

That is irrelevant to the changes being introduced, which charge lower rates for low credit score borrowers than before, and higher rates than before for high credit score borrowers.

You are wrong. Lower credit scores get higher rates. That is a fact that you can’t deny.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

jsteele wrote:

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

The advantage is not as big, because part of that advantage goes to the one that did not work for it. No matter how you spin it, it stinks for those that do the right thing.

If you have $1,000 in the bank, and I have $100, you have a $900 advantage. Let’s take $100 from you and give it to me, you still have an $800 advantage, so it’s fine right?

Is $800 not an advantage worth working for? If things are so easy for irresponsible people then why are you still paying your mortgage every month? Oh yeah because there is an actual advantage to being responsible despite your hyperbole.

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?

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.

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.

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."

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.

Not if they cant afford it...that's a ridiculous assumption. See also the additional fees they wanted to add but banks freaked TF about it even though it is just as reasonable of a fee and it actually attacks the issue of not being able to afford your mortgage. Higher DTI are usually denied mortgages.

And you refuse to address the fact that credit is not the only indicator of creditworthiness. Your definition of risky is flawed when it's based on credit scores as suggested in the latter part of my post. Credit scores don't take into account rental and utility history. You cant get delinquencies or repeat submissions removed from the credit agencies. They have no one who manages them or deals with them since they are independent. Meaning that if Discover categorizes you as late because of some flaw in the reporting system and your credit score goes down, its down for 7 years. And you have no way to get it removed, even if you report it.

How can it possibly be a ridiculous assumption when that’s exactly what happened in the run up to the 2008 crash?

Your definition of risk is also flawed because there is no perfect definition of risky. So I’m not sure what magical point you think you are making by pointing out that something is flawed when everything we could come up with is flawed. Even if better definitions of risky exist, credit scores alone are still an adequate starting point unless you really think that cash flow component to credit would materially alter how risk is priced. Sure, it’ll change things at the margin, but, guess what, cash flow components will overwhelmingly help those who score highly on FICO already because debt service is a function of cash flow.

And you still are ignoring the fundamental point, risk is being transferred from more risky borrowers to less risky borrowers. Conceding that FICO is an imperfect, flawed measurement, it’s still pretty damn good. And while better credit scoring would at the margins possibly blunt the credit effect of the LLPA changes, directionally, it is absolutely true that in the aggregate the changes to the LLPAs will transfer risk from riskier borrowers to less risky borrowers.

You’re arguing something akin to: since the SAT isn’t a perfect predictor of future college success, and a marginally better formula incorporating other data in addition to the SAT would be better, therefore the SAT is invalid as a predictor. That’s simply not true. Even if a better marginal predictive formula exists, it doesn’t invalidate the predictive power of the SAT.

2008 was a crisis due to the interconnectedness of banks and financial products. Proper regulation has placed firewalls between at risk sectors to prevent a repeat occurrence. You are just boosting a flimsy partisan narrative by blaming 2008 on affordable housing efforts.

[Anonymous]

Anonymous wrote:

Red states are now using this as an excuse to play politics. Totally transparent partisan warfare. Just look at which states signed this letter lol!

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jsteele wrote:

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

The advantage is not as big, because part of that advantage goes to the one that did not work for it. No matter how you spin it, it stinks for those that do the right thing.

If you have $1,000 in the bank, and I have $100, you have a $900 advantage. Let’s take $100 from you and give it to me, you still have an $800 advantage, so it’s fine right?

Is $800 not an advantage worth working for? If things are so easy for irresponsible people then why are you still paying your mortgage every month? Oh yeah because there is an actual advantage to being responsible despite your hyperbole.

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?

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.

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.

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."

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.

Not if they cant afford it...that's a ridiculous assumption. See also the additional fees they wanted to add but banks freaked TF about it even though it is just as reasonable of a fee and it actually attacks the issue of not being able to afford your mortgage. Higher DTI are usually denied mortgages.

And you refuse to address the fact that credit is not the only indicator of creditworthiness. Your definition of risky is flawed when it's based on credit scores as suggested in the latter part of my post. Credit scores don't take into account rental and utility history. You cant get delinquencies or repeat submissions removed from the credit agencies. They have no one who manages them or deals with them since they are independent. Meaning that if Discover categorizes you as late because of some flaw in the reporting system and your credit score goes down, its down for 7 years. And you have no way to get it removed, even if you report it.

That is irrelevant to the changes being introduced, which charge lower rates for low credit score borrowers than before, and higher rates than before for high credit score borrowers.

You are wrong. Lower credit scores get higher rates. That is a fact that you can’t deny.

DP, but you can't read.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Red states are now using this as an excuse to play politics. Totally transparent partisan warfare. Just look at which states signed this letter lol!

No. If it is partisan warfare it is because this administration cannot help itself to be fair to consumers.
I am thrilled they are calling out this administration.
And, note that this was not a LAW passed by Congress but a RULE implemented by this incompetent administration.

[Anonymous]

I’m ok with this! We have to take steps to make homeownership affordable. Homelessness is too high.