The Biden administration is “building back better” with its latest push toward socialism. The federal government will force homebuyers with good credit scores to pay higher mortgage rates and fees to subsidize those with poor credit history who pose a greater lending risk.
This new fee will go into effect beginning May 1 as part of a Federal Housing Finance Agency initiative to promote affordable housing. The new rule will affect mortgages originating from private banks nationwide. Federally backed mortgage companies, such as Fannie Mae and Freddie Mac, will enact Loan Level Price Adjustments (LLPAs), fees charged by lenders to compensate for risks associated with a given loan.
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Homebuyers with credit scores of 680 or higher will pay ~$40 per month more on a home loan of $400,000.
Buyers with down payments of 15% to 20% will get socked with the largest fees.
Buyers with riskier credit ratings and lower down payments will get lower rates and fees. pic.twitter.com/yVEp3btNJg
— Wall Street Silver (@WallStreetSilv) April 19, 2023
The Washington Times reports:
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.
Industry specialists have argued against this regulation, stating that punishing homebuyers with good credit is nonsensical. Ian Wright, a senior loan officer at Bay Equity Home Loans in San Francisco, slammed the new rule saying, “The changes do not make sense. Penalizing borrowers with larger down payments and credit scores will not go over well. 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.”
Wright continued claiming the rule would “cause customer-service issues for lenders and individual loan officers when a consumer won’t understand why their interest rate and fees suddenly changed.” He continued, “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,” their interest rate and fees suddenly changed.”
Former commissioner of the Federal Housing Administration under Obama’s presidency David Stevens also criticized this new lending regulation. Stevens said the new fees “will create extreme confusion as we enter the traditional spring home purchase season.” He continued, “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. To do this at the onset of the spring market is almost offensive to the market, consumers, and lenders.”
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This regulation would be a slap in the face to consumers who have worked hard to build a good credit score and sizeable downpayment for a home through years of financial responsibility. Also, it would make buying a home even more expensive at a time when interest rates are high and mortgage payments are eating a massive chunk out of Americans’ paychecks. Furthermore, this direct redistribution of wealth could severely dent housing demand and drive the economy closer to a recession.