New Mortgage Rules to Raise Costs for High-Credit Homebuyers, Reduce Penalties for Low Credit
Summary from the AllSides News Team
Starting May 1, homebuyers with high credit scores may pay higher mortgage rates — and those with low scores may see lower ones — due to a new federal housing policy.
The Details: As part of its effort to increase housing affordability, the Federal Housing Finance Agency (FHFA) is adjusting credit score factors in the matrices used to determine Fannie Mae and Freddie Mac’s Loan-Level Price Adjustment (LLPA) borrowing fees. According to the FDIC, “Most lenders convert LLPAs into the interest rate on the mortgage, which the borrower pays over time.” The new changes include lower effective cost penalties for borrowers with low credit scores and increased costs for those with high credit scores. The changes were announced on January 19.
For Context: Average U.S. 30-year fixed mortgage rates rose sharply from 3.22% to 6.42% in 2022, but appear to have leveled off somewhat in 2023, reaching 6.39% on April 20. The FHFA’s mortgage changes come on the back of a rise in single-family housing construction and a leveling off of home prices.
How the Media Covered It: While it was unclear what direct involvement President Joe Biden had in the decision, some coverage across the spectrum framed the changes as Biden’s doing. USA TODAY (Lean Left bias) said whether the changes were positive or negative “depends on which side of the spectrum you land,” highlighting an expert who said they “can see both sides.” Coverage was generally more negative in right-rated outlets, many of which framed the changes as “punishing” “good-credit” homebuyers to subsidize “high-risk” homebuyers.
Featured Coverage of this Story
From the Right
Real estate expert shreds Biden rule punishing homebuyers with good credit: 'It's madness'A new rule from the Biden administration will have good-credit home buyers paying more monthly to subsidize costs for high-risk buyers.
The changes, which will begin in May, have many experts worried about the impacts both on buyers and the economy.
Real estate expert and Madison Ventures+ managing director Mitch Roschelle unpacked the "madness" on "Varney & Co." on Thursday.
"It's bizarro world," he said. "That fee that's charged, PMI, which is personal mortgage insurance, that fee that FHA [Federal Housing Administration] charges is intended to punish those with lower...
From the Left
Mortgage fees are changing for homebuyers next month. Here's what you should know.If you're looking to buy a home, be aware that mortgages will change next month.
Starting May 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.
In some cases, people with higher credit scores may end up paying more while those with lower credit scores will pay less.
From the Center
Biden Raises Costs for Homebuyers With Good Credit to Help Risky BorrowersHomebuyers with good credit scores will soon be facing higher mortgage fees as the Biden administration seeks to close the racial homeownership gap and get more first-time and low-income buyers through the door.
Starting in May, a new federal rule will upend the current structure of the Loan-Level Price Adjustment (LLPA) matrix. Homebuyers with a good credit score could see their monthly mortgage payment rise by over $60 a month, while riskier borrowers will get more favorable mortgage terms because their fees were reduced. It's a move the Federal Housing...
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