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

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]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.[/quote]

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.[/quote]

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

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

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

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