DawgTalkers.net Forums DawgTalk Palus Politicus Biden to hike payments for good-credit homebuyers to subsidize high-risk mortgages

Pretty sure this was part of the fuel that caused the economic collapse of 2008. Giving irresponsible/unproven people a discount who have to commit to being responsible for 30 years is backward.



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.

Lenders and real estate agents say the changes will frustrate homebuyers with high credit scores and homeowners seeking to refinance because the rule punishes them for their relatively strong financial positions.

“The changes do not make sense. Penalizing borrowers with larger down payments and credit scores will not go over well,” Ian Wright, a senior loan officer at Bay Equity Home Loans in the San Francisco Bay Area, told The Washington Times in an email message. “It overcomplicates things for consumers during a process that can already feel overwhelming with the amount of paperwork, jargon, etc. Confusing the borrower is never a good thing.”

He said the rule will “cause customer-service issues for lenders and individual loan officers when a consumer won’t understand why their interest rate and fees suddenly changed.”

“I am all for the first-time buyer having a chance to get into the market, but it’s clear these decisions aren’t being made by folks that understand the entire mortgage process,” Mr. Wright said.

The new fees “will create extreme confusion as we enter the traditional spring home purchase season,” said David Stevens, a former head of the Mortgage Bankers Association who served as commissioner of the Federal Housing Administration during the Obama administration.


“This confusing approach won’t work and more importantly couldn’t come at a worse time for an industry struggling to get back on its feet after these past 12 months,” Mr. Stevens wrote in a recent social media post. “To do this at the onset of the spring market is almost offensive to the market, consumers, and lenders.”

The housing market has been hit hard by a series of Federal Reserve interest rate hikes that have driven mortgage rates above 6%, roughly double the level from early 2022. The Fed has raised rates rapidly to bring down inflation, which hit a four-decade high of 9.1% last summer.

“In the wake of a 3-percentage-point increase in mortgage rates, now is not the time to raise fees on homebuyers,” Kenny Parcell, president of the National Association of Realtors, told the Federal Housing Finance Agency earlier this year.

Under the new mortgage financing rules, homebuyers with riskier credit ratings and lower down payments will qualify for better mortgage rates and discounted fees.

Federal Housing Finance Agency Director Sandra Thompson, a Biden appointee, said the fee changes will “increase pricing support for purchase borrowers limited by income or by wealth.” The agency calls the overall fee changes “minimal” and said the moves will ensure market stability.

After a storm of criticism, the agency delayed to Aug. 1 an upfront fee for debt-to-income ratios of 40% or more. The ratio is calculated by dividing the homebuyer’s monthly debt payments by gross income. It’s one of the key measures lenders use to determine whether a mortgage applicant qualifies for a loan.


Ms. Thompson said the postponement will help “to ensure a level playing field for all lenders to have sufficient time to deploy the fee.”

The fee changes are intended to subsidize higher-risk borrowers by imposing “an intentional disruption to traditional risk-based pricing,” Mr. Stevens said.

“Why was this done? The answer is simple, it was to try to narrow the gap in access to credit especially for minority home buyers who often have lower down payments and lower credit scores,” he wrote in a post on LinkedIn. “The gap in homeownership opportunity is real. America is facing a severe shortage of affordable homes for sales combined with excessive demand causing an imbalance. But convoluting pricing and credit is not the way to solve this problem.”

He predicted that the Federal Reserve will soon complete its course of tightening its balance sheet and mortgage rates will fall.

“Demand for homes will begin to rise and the same challenges for first-time homebuyers will return,” he said.

Lenders also are worried about the impact of the debt-to-income fee that takes effect in August because homebuyers might feel as if they are in a game of “bait and switch” on their projected borrowing costs.


“When a lender is quoting a borrower, there’s a lot they don’t know yet, such as what the property taxes and insurance payments are per month,” Mr. Wright said. “Changes happen to the mortgage payment and income during escrow, so this will cause frustration to borrowers and lenders for the sudden rate/fee changes. Most of us loan officers will then say let’s ‘eat’ the cost for the borrower to keep them happy (resulting in losses for the lender and loan officer).”

He said the added uncertainty will cause delays “during an already competitive real estate market lacking inventory.”

“For example, due to the low inventory and fierce competition, many buyers must close their transactions in less than 30 days to get their offer accepted,” Mr. Wright said. “The sudden rate changes will cause lenders to ‘re-disclose,’ adding additional days to the transaction. This puts extreme timeline pressure on the buyer and lenders forced to re-underwrite the file for the changes.”

In a letter to Ms. Thompson in February, Mortgage Bankers Association President Bob Broeksmit said the timing of the fee changes was “especially troubling” and that the debt-to-income ratio fee creates “operational issues and quality control” for lenders.

“A borrower’s income and expenses can change several times throughout the loan application and underwriting process, especially considering evolving assumptions concerning the nature of debt and income, and the growth in self-employment, part-time employment, and ‘gig economy’ employment,” Mr. Broeksmit said.

This is by far the craziest, most counter-intuitive, socialist act ever carried out by this administration.

Of all the ways to try to address a problem, STEALING from the people who are the model of how the system works is just mind-boggling.


This would fit better in a dark comedy... Idiocracy Part Duh.

Only simpletons think something like this is a good idea.

Do a good job of paying your bills, so you get to pay more for those who don't pay their bills? How idiotic is that?

Good credit isn't a matter of wealth or not. It's a matter of responsibility. Either you are a responsible person, or you aren't. If you borrow, you pay back according to the terms to which you agreed.

There really are no arguments against what I just said. If you do, then I suspect you haven't been paying your bills either.

I have no problem with people with lower credit scores being able to get loans, but requiring people who have good scores, because they have proven to be credit worthy, pay for others lack of responsibility just doesn't fly. It's bullcrap is what it is.

That's the problem, my friend... there is no personal responsibility. EVERYTHING is someone else's fault.

How were any of these people supposed to know they were supposed to pay their bills on time? Or even pay their bills at all? Why be bothered with that if someone dumb enough to abide to those archaic morals can pay their way?

Below 680 seems a pretty low credit rating to be getting a mortgage. That would worry me.

However - while everyone is shocked and outraged can we get a little clarity on the details ??

The HEADLINE says this is about subsidizing high risk mortgages. The article says borrowers with higher credit ratings will pay a fee - I'd call it a small fee because $40 on a $2,000 monthly payment is 2 % of the monthly payment ... but I do get that any increase isn't helpful.

The bit I am missing - that the article is missing - how and where and why and who is going to get a subsidy? It says ""The fee changes are intended to subsidize higher-risk borrowers by imposing “an intentional disruption to traditional risk-based pricing,” Mr. Stevens said."" .... but that doesn't tell us anything. That's the part I would like some clarity on.

Personally I think that mortgage lending should be regulated more tightly so as to never allow anything like 2008 to happen again. By doing so you probably slow down the housing market and slow down price rises because you reduce the buyer pool some... But if people have bad credit I am not in favor of putting them into a situation where they buy a property and become more likely to default. My *guess* would be this is something to do with it being cheaper to pay a mortgage for a house then rent it. No idea if that's the case - or if that is a disconnect that governments should be trying to address.

Small "fee"? It's not a fee -- it's legalized theft.

Over the life of the loan, you're stealing $15,000 from someone who is credit worthy and giving it to someone who isn't.

It's hard to cross that line and make me care what the article is missing. Intentions are stated loud and clear. Steal from those doing the right thing because if anyone else hasn't, well, that can't possibly be their own fault. And since there can't be any accountability, it must just be because life is unfair for them.

As far as your confusion, from what I've read -- certain people will be penalized for having good credit. That penalty will become a credit on the monthly payment of those who don't.

This explains with more depth:
https://reason.com/2023/04/21/borro...zed-under-new-federal-mortgage-fee-plan/


And then, get this... "Under the new rules, high-credit buyers with scores ranging from 680 to above 780 will see a spike in their mortgage costs – with applicants who place 15% to 20% down payment experiencing the biggest increase in fees…."


You cannot make this stuff up!

j/c

680 is not a low credit score for a mortgage. Conventional mortgages can be approved with 620 or higher. FHA can go even lower.

There is a lot that does not make sense to me about this. Using the links below, page 2 for each: looking at your top tier borrower, 780+ credit score, the fee on a 95% LTV mortgage is 0.125%. Same borrower, larger downpayment to achieve a lower LTV of 80%, the fee is 3x as much at 0.375%. The 80% loan is not as risky as the 95% so I'm not really sure what is driving this. It seems to be meddling with risk based pricing in an illogical way.

For comparison, the old grid would have the same borrowers paying a 0.750% fee for a 95% LTV mortgage and a 0.250% fee for the 80% mortgage. This is definitely more in line with how you would expect risk-based pricing to work.

To summarize:
-Old grid, the higher the LTV, the higher the fee, save for the 75-80% bucket for some reason (might be a popular 2nd home/investment home LTV requirement, not really sure)
-New grid, as LTV improves (decreases, lower risk to lender), borrowers get charged a higher fee

That said, when comparing old vs new grids, fees are down across the board with one HUGE exception: the fee for the 75-80% LTV bucket has increased compared to the old grid.



At 80% you are not required to have private mortgage insurance (PMI), but you pay a higher monthly interest rate now. Really unsure why this borrower group was singled out here and effectively penalized. Eyeballing it the increase for this LTV bucket is roughly 0.125% more when compared to the old grid - on a $400k loan that does work out to be about $45/month more, which in turn ends up being $540/year and $16,200 over the entire 30 year term.

I'd love to hear the explanation for why every single LTV bucket, except for 75%-80%, received a decrease in the LLPA.


Just wait until they roll out the additional fee for having high debt (debt-to-income ratio >40%)....

New LLPA (Fee) Grid

Old LLPA Grid

This makes zero sense.... I can appreciate finding ways to help people get affordable housing... stealing from those with a high credit score to give to those with a poor credit score makes zero sense... maybe we should figure out better programs to get those with a low credit score to get more financially knowledgable and get a higher credit score before taking on a mortgage...

"Sorry Mr. Johnston, we would love to give you an a better rate on this loan, but we would need you to work on lowering that credit score."

I don’t get this either.

That's what I was telling my wife. Ideally you would know a few months in advance that you plan on entering the market and purposefully start making late payments. Make sure you effectively lower your credit score before you apply for a loan. Also, make the minimum down payment since those people will get punished the most (I can't believe I just typed that lol)... and then add a $75,000 payment on principle with your first payment.

Next we'll learn that punishment will be flexible and your credit score will be monitored for the life of the loan.

"Hey, make sure that payment is late, we're getting dangerously close to the good credit mark and we still have years left on the mortgage! You've got to learn to quit paying everything on time!"

Or just vote the socialists out of the office.

I almost said in my response to 'Peen. "Don't worry, it's almost over". Nobody in their right mind, red or blue, could possibly be on board with shenanigans like this. It only takes so many straws to break the camel's back, and people from all walks are about fed up.

They think they have America by their heart-strings with all of these bleeding heart initiatives and that people can't smell %$* when someone's rubbing it on their face. At the end of the day, the real purpose of this initiative is to mitigate risk for the banks so that they can rape more people on mortgages when the rapings will yield them the most profits (interest rates). It's built in risk mitigation at the expense of those who make the system work. Shameful.

Can't congress squash this?? not planing on refinancing or getting a mortgage this year....but currently targeting 2025 and would prefer to not pay a stupid 'your too responsible with your money' fee....

I hope so.

This really impacts the "Average Joe". The person who takes out loans and then tries hard to make their payments on time. Like I said earlier, credit score doesn't matter where you sit on the wealth scale. A person making $12,000 a year can get some card, pay on time and build a decent score. Obviously your income and resource might impact the size of the loan or credit limit issued.

A guy like Jimmy Haslam doesn't really care all that much about credit score. Either he won't care about paying an extra point of interest, or he will just say screw it and write a check and just pay for things outright. If Mrs Haslam decides she wants to re-do a bedroom, they aren't heading down to Rooms to Go and putting things in to lay away or taking things out on some pay over time plan.

Well when something sounds so wrong - doesn't it make sense to find out all the actual facts? It's not like the Washington Times is wholly neutral. I'd do the same thing if I read something in the Guardian or New Yorker that was missing details about some terrible thing about the Republicans.

Here’s a novel idea. How about everyone pay the same interest rates for all loans.

Point taken. I was just fired-up and speaking from the stance of having read more than enough (from multiple sources) to know the facts. You started with "small fee" and continued with "all the facts"... it was pretty easy to blow off lol. As to your last sentence -- you're in the minority at DT, I mean that as a compliment.

Are you referring to, helping and feeding the poor and homeless? Or maybe you are referring on raising taxes on the wealthiest of Americans and their corporations to pay the same tax rates as the rest of us? Or maybe you are referring to closing our borders to those huddled masses yearning to be free? Or maybe you are referring to putting some sort of bandaid on the mass shooting epidemic in this country? Are you referring to our government keeping the separation of state and church a part of our constitution? Exactly what bleeding heart initiative are you talking about here?

None that are worth discussing with you. The sentence speaks for itself.

Not really. This is all happening because the government put Fannie Mae and Freddie Mac under conservatorship in 2008. The plan was always to release them once thing stabilized. Of course, it never works that way. Nobody ever gives up power willingly.

That isn't much different than what this is. Some pay higher rates because history has shown the lender has to wait longer for payment and doesn't have to go through hoops to get paid.

Think about your own personal life. Some people might need to borrow a couple of hundred bucks. You probably have some people, no problem, you know they are going to pay you back. Others you know you are going to have to pull teeth before you get all your money back.

Some start telling you this and that and want to give you $10 now and more later. Now all of a sudden you are trying to keep track of what has been paid, they don't answer your phone calls. I've been there just like everybody else.

Banks have figured out that people who are slow to pay need to pay more interest because there is going to be more cost to collect the money, and there is a higher risk they are never going to get all their money back. They end up selling it off to collection agencies for pennies on the dollar.

We are already paying higher rates to help offset the uncollected loans banks already sustain. Banks aren't in the business to lose money, and they shouldn't be. If you have a credit card and or have ever taken a loan for a car or home, you are already paying points more to pay for the sluff offs who don't pay their obligations.

Something tells me you aren't one of the sluff offs. We have all been late for a payment here and there, but I don't think you have ever stuck a bank with uncollected debut.

Why do democrats hate honest people that pay their debts on time?

None of this makes any sense. It just provides solid evidence that when it comes to political parties there's plenty of stupid to go around.

Probably for similar reasons that Republicans hate minorities, love guns more than life and don't want women to have control over their own bodies.

If you're going to steal Perfect's quotes, you should at least credit him.

who knows.
in the 80's 20% interest rates are basically equal to where we are at 10%.

Cost of living in 1989 was 52k vs 2022 87k

Average cost of a home in 1989 was 120k
Average cost of a home in 2022 was 392k

Avg mortage rate in 1989 was 12.75
Mortage rate now is 6.625% (more like 9% with the new penalty)

HE can kiss my entire ass.

Of course not, because your mind can’t process an answer to any question asked. But I wasn’t asking you anyways troll.

Dude? Don’t go there.

Or what?

Ok so you’re better than everybody I get it. You deserve a better rate. gotcha. BTW my credit rating is over 800 and I’ve always paid my debts on time and usually early and don’t expect a better rate than someone trying to develop a credit score.

Then you're either full of it, or utterly foolish, because that is EXACTLY how it is supposed to work. Those that pay their debts are less of a risk, so they have EARNED the better rates.
The person just getting started is a significantly larger risk, and as such, they pay extra for the privilege of borrowing from someone.

You get rewarded for proving yourself to be a lower risk borrower.

He who?

100% agree

Biden on this subject.

"Only simpletons think something like this is a good idea.

I can say the same thing about those that keep defending Trump.,.,,,

Trump has nothing to do with this topic.

agreed

Yes he does! He’s the perfect example of a truly risky borrower, but GOPer dumb asses still finance him. Lol