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

[Anonymous]

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

Someone in here keeps posting what seem like legitimately incorrect points regarding this being for FHA loans.

This is NOT FHA. It is FHFA. FHFA is responsible for setting fees for the GSE sponsored loans, which is the majority of the market.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Communism

more like socialism

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

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

This point can’t be made credibly by shouting out social systems designed to not enrich private banks.

To your point, private banks have since their inception taken advantage of blocked or limited access to bank resources in minority and poor communities to charge usurious fees to these communities for basic banking services. This has been the subject of decades of litigation. It has allowed banks to amass fortunes, while maintaining higher income clients by offering them better rates. Banks make money however the law allows them, as well as through extralegal ways until available laws are enforced. If you identify people being treated unfairly by a bank, that means there is a group of even richer people benefiting from that policy. Banks benefit when each group focuses anxiety on supposed unfair gains to the people below them instead of massive gains to the people above them. Look up!

This. And the fact that the subject fees depend entirely on credit scores, which are numbers generated by private industry for private industry. And there's a lot of inequality in those numbers as well.

https://www.forbes.com/advisor/credit-cards/from-inherent-racial-bias-to-incorrect-data-the-problems-with-current-credit-scoring-models/

And if you do have a great credit score - YOU STILL HAVE THE LOWEST FEES. They just aren't as low as before. I am a middle aged white moderate with a good credit score. This does not bother me in the least. And I'll say again - the fact that the people most "outraged" in these articles are from the mortgage and banking industry ought to tell you who really stands to lose here. And it ain't you. Fight the rage-bait.

[Anonymous]

Anonymous wrote:

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

Someone in here keeps posting what seem like legitimately incorrect points regarding this being for FHA loans.

This is NOT FHA. It is FHFA. FHFA is responsible for setting fees for the GSE sponsored loans, which is the majority of the market.

Thank you for clarifying!

[Anonymous]

I read once that the existence of Fannie/Freddie causes mortgage rates to artificially lower due to govt backing. That savings mainly goes to richer people who owns.

The interesting part that subsidy to the rich is far greater than welfare check cost.

Fannie and Freddie is welfare for the rich

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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

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

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

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

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

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

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

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

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

The article was click bait.

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

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

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

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

A few thoughtful people asked for an explanation.

The lemmings just fell for it.

That person was kidding! And you just fell for it.

[Anonymous]

I'm outraged!!!

[Anonymous]

Infuriating. The truly wealthy won't pay this fee. The striver with the 800 credit score who can't afford to pay cash once again gets hosed to pay for the 650 credit score to buy more house than they can afford.

[Anonymous]

This all seems like an example of the meme of the "regular people" fighting over a slice of pie while the "rich" (in this case the banks and mortgage lenders/brokers) taking the whole rest of the pie.

[Anonymous]

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

Homebuyers with good credit scores will soon encounter a costly surprise: a new federal rule forcing them to pay higher mortgage rates and fees to subsidize people with riskier credit ratings who are also in the market to buy houses.

The fee changes will go into effect May 1 as part of the Federal Housing Finance Agency’s push for affordable housing, and they will affect mortgages originating at private banks across the country. The federally backed home mortgage companies Fannie Mae and Freddie Mac will enact the loan-level price adjustments, or LLPAs.

Mortgage industry specialists say homebuyers with credit scores of 680 or higher will pay, for example, about $40 per month more on a home loan of $400,000. Homebuyers who make down payments of 15% to 20% will get socked with the largest fees.

The new fees will apply only to Americans buying houses or refinancing after May 1.

Is this true?

So banks lobbied politicians to get us to cover riskier loans through more fees? That doesn't make a lot of sense.

[Anonymous]

Anonymous wrote:I don’t understand the outrage from liberals on this?

Ugh because it's hitting their own pocket books, it's fine if someone else (richer) is paying, just not them.

[Anonymous]

Anonymous wrote:

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

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

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

Because minorities often have lower credit scores than white people. This is just a way to redistribute wealth.

Welcome to how democrats are enacting progress and equity.

It sucks for black people like myself, I have a 800+ credit score so basically using a FHA loan would hurt me. Yikes. This policy isn’t good at all either way.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Excuse me while I go tank my credit

You do know if your credit is worse your fees are still higher, right.

Before the fee for worse credit was 4% now it’s 2% where good credit went from .25% to 1%.

Do you understand?

Thank you. This is what needs to be explained again and again and again.
People with good credit were getting a HUGE discount on those fees. I didn't hear the outrage then.
Now they are still paying less than people with bad credits but the right wing media wants you to think that they are now paying more.

[Anonymous]

Anonymous wrote:

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

Is this accurate?

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

No. That is not correct.

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

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

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

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

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

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

If the fees for higher risk borrowers didn’t correlate to risk, they could have just lowered those fees to reflect the true risk. They are raising fees on low risk borrowers to make up the difference needed to cover the risk on higher risk borrowers. It doesn’t need to be as much %-wise because the lower risk borrowers are borrowing more $$.

[Anonymous]

Anonymous wrote:This is what we voted for, so it doesn’t really surprise me.

Bingo.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Excuse me while I go tank my credit

You do know if your credit is worse your fees are still higher, right.

Before the fee for worse credit was 4% now it’s 2% where good credit went from .25% to 1%.

Do you understand?

Thank you. This is what needs to be explained again and again and again.
People with good credit were getting a HUGE discount on those fees. I didn't hear the outrage then.
Now they are still paying less than people with bad credits but the right wing media wants you to think that they are now paying more.

Please cite data showing low risk borrowers were “getting a huge discount.” That would mean that the fees didn’t actually relate to the risk related to their loans. If the difference in the fees were justified by the data, that’s a rational difference, not a “discount.”