(The Center Square) – The latest in a series of new Biden administration rule changes that charge higher fees to certain home buyers with good credit and lower fees for buyers with worse credit went into effect this week despite pushback from Republicans and many financial experts.
A group of U.S. House and Senate Republicans as well as state officials were unable to stop the rule, which a Biden administration official confirmed went into effect as planned Monday.
A coalition of Senate Republicans recently sent a letter to Sandra Thompson, director of the Federal Housing Finance Agency, the latest in several policy changes from the group. The agency implemented the rule change this week.
Critics argue the changes, which increase Loan-Level Price Adjustment fees for mortgage borrowers with higher credit scores and decrease fees for those with worse credit, amount to penalizing those with good credit to help those with bad credit in the name of equity.
“This shortsighted and counterproductive policy demonstrates a profound misunderstanding of the necessity of accurately tailoring housing finance products to credit risk and establishes a perverse incentive that punishes hardworking Americans for their fiscal prudence,” the letter said.
The loan-level price adjustment is a fee assessed after bankers evaluate the risk of lending them money, and the change potentially costs the affected borrowers with better credit thousands of dollars.
“The housing market should not be exploited as a means to pander to targeted demographics that you have chosen, nor an instrument to secure political favoritism,” the Senators’ letter said.
Adam Russell, a spokesperson for the FHFA, confirmed to The Center Square that the fee change went into effect as scheduled Monday, but added that “there is a good deal of misinformation” about the policy. The FHFA has publicly pushed back on the characterization that these fee changes punish those with better credit to help those with worse credit.
Supporters of the policy point out this is one of several changes to the fees policy, a policy that is often updated, and argue that it is unfair to draw a connection between the fee changes for the two groups, namely those with good and bad credit. They also emphasize that those with worse credit will still pay significantly more than those with better credit.
The change applies only to certain loans backed by Freddie Mac and Fannie Mae. A chart from the Urban institute shows that those with credit scores of 680 or higher and with down payments between 5% and 20% will pay higher fees while borrowers with down payments of less than 5% will pay smaller fees, regardless of credit scores.
Thompson said in a news release that the fee change would “advance their mission of facilitating equitable and sustainable access to homeownership.”
The lawmakers took issues with this assumption, though, saying many poorer Americans have good credit and will be punished by this policy.
“Moreover, your proposal incorrectly assumes that creditworthiness is solely attained by only the affluent, blatantly disregarding the countless lower-income Americans who have demonstrated exceptional financial responsibility,” the letter said. “By conflating credit scores with wealth, you not only engage in a gross oversimplification of a complex issue but also perpetuate a false narrative that unfairly maligns hardworking citizens in the lower-income bracket.”
The lawmakers brought up what has become a key criticism of the plan, in particular that pushing home loans to Americans with poor credit was a key reason for the 2008 financial crisis.
“The fact that a proposal flaunting credit risk is being openly pushed by FHFA just a decade-and-a-half after the housing-led 2008 financial crisis is staggering,” the letter said.
Economists have raised similar concerns, pointing out that the FHFA cites equity reasons, not financial, as the driver for this decision.
“Rather than saddle those with scores 680 or lower with more debt, it’s far better to encourage them to re-establish credit,” Joel Griffith, an economic expert at the Heritage Foundation, told The Center Square. “Most people find themselves financially strapped at some point. A few years of consistent timely payments and debt paydown can help someone even emerging from bankruptcy attain scores at 680 or worse with a near 0% loan from FHA.”
States have also pushed back. A coalition of state financial officials in 26 states are speaking out against the new federal mortgage fees, which they call “unconscionable.”
“This new policy makes it more expensive for people with good credit to buy houses – and that’s absurd,” said Pennsylvania Treasurer Stacy Garrity, who leads the coalition. “Americans who have built a good credit score and saved enough to make a strong down payment should not be penalized and forced to pay more on their mortgage every single month.”
Griffith also argues the plan would increase the cost of homes, in particular starter homes.
Republicans in the U.S. House have also voiced their disapproval of the rule change. U.S. Rep. Andy Biggs, R-Ariz., introduced the Responsible Borrowers Protection Act last month. The legislation would have blocked the rule from going into effect, but has now missed the deadline. It could be a framework for future legislative efforts to overturn the rule.
“The FHFA – led by a President Biden appointed director – is punishing financially responsible mortgage borrowers,” Biggs said. “Their agenda of equity over equality defies common sense and will endanger the stability of the housing market.”
The Senate letter was signed by U.S. Sen. Mike Braun, R-Ind., Ted Budd, R-N.C., Shelley Moore Capito, R-W.V. Tom Cotton, R-Ark., Kevin Cramer, R-N.D., Lindsey Graham R-S.C., Chuck Grassley, R-Iowa, Ron Johnson, R-Wisc., James Lankford, R-Okla., Jerry Moran, R-Kan., Mike Rounds, R-S.D., Marco Rubio, R-Fla., Eric Schmitt, R-Mo., John Thune, R-S.D., and Todd Young, R-Ind.
Yeah, he seems to be all about demonizing success===both on a personal level as well as a national one.
“The lawmakers brought up what has become a key criticism of the plan, in particular that pushing home loans to Americans with poor credit was a key reason for the 2008 financial crisis.”
And with the same people that made the 2008 financial crisis are back in positions to create another home loan financial crisis.
“The FHFA – led by a (Obama’s puppet) President Biden appointed director – is punishing financially responsible mortgage borrowers,” Biggs said. “Their agenda of (woke) equity over equality defies common sense and will endanger the stability of the housing market.”
So let the traitorous, destructive, woke, socialist Democrat Party create another home loan financial crisis and when it crashes and burns, you will be able to buy a foreclosed on home for pennies on the dollar. Of course when Freddie Mac and Fannie Mae declare bankruptcy AGAIN, we the taxpayers will bail them out AGAIN! 🙁 🙁 🙁
The left, ALWAYS loves to punish success and working hard.. WHILE Rewarding slovenly laziness and ineptness.
These inhuman socialists who have no concepts of what normal human behavior or successful righteous living is supposed to be about, have no hint that rewarding the losers and punishing the winners just creates a nation of more losers. It’s getting so pathological that these socially confused will now openly defy human logic to the point of our own national destruction, led by a Biden crime family who is so owned by the criminal elements of our gone astray establishment, that they now openly declare war on everything that makes America work. The guilt of their own crimes has driven them mad to the point they now seek take everyone down with them when they go, in their misery that must have and create more poverty and crime ridden company, lest they die sad and alone and in the poverty of spirit and pocketbook that always attends their sad endings. There is a big difference in just robbing from the rich to give to the righeous poor,,,,and robbing from the hard working and successful and giving it to the lazy, stupid and failed men of evil intentions, the very same men who now lead our nation having elevated themselves in the deceptions none would have voted in had they been up front and honest at election time, by men fit only to live in houses of straw where when the wolf comes knocking it is THEY, not WE THE PEOPLE who get blown away financially and then eaten alive in misfit laws of oppression disguised as equity.
Like I said before ,there are a lot of poor seniors with good and that this rule will hurt. A lot of seniors down size to a smaller home. With such high Interest rates you will need to put down more money.
But Biden only cares about his people not all Americans.
ONCE AGAIN showing, he’s NOT HTE PResident of the ENTIRE USA. Just the leeches, criminals and lowlifes.
Did the article miss something? “ while borrowers with down payments of less than 5% will pay smaller fees, regardless of credit scores.”
So if you have a fantastic credit score you do the math and figure out if a lower down payment gives you lower fees versus the higher interest rate for a lower down payment. Then (if it works out that way) apply your “down payment “ to your first monthly payment. Just make sure there are no penalties for paying more / early.
More details from another source:
Before the rule change, a borrower with a credit score of 740 and a 15% down payment would have faced a 0.25% fee on their mortgage. After the change, that fee will rise to 1%. It’s the opposite story for some borrowers with lower credit ratings: Someone with a score of 640 putting down 15% would have paid a 3.25% fee before. After the change, it will fall to 2.5%.
Talk to your lender and perhaps talk to more than one, making sure they present you with options including what it would cost you both upfront and over time for a conventional loan, as well as a Federal Housing Administration loan.
That’s important because these changes have shifted the competitive landscape between these two types of mortgages. Depending on a household’s financial picture, one may actually be more advantageous than the other.
I;ve long advocated SHOPPING around for your mortgages! That and car buying are the 2 BIGGEST expenses you have.
Republicans in the U.S. House have also voiced their disapproval of the rule change.
Well than Congress focus on getting it changed NOW. I’m sure Democrats that have worked hard all their lives do not want to be penalized like this either. Get it done.
democraps don’t work hard their whole lives. They soak up other peoples money while laying at home doing nothing.
Since this supposedly only applies to those who do mortgages via fanny may and freddy mak, EASY SOLUTION IS FOR home buyers to NOT USE THOSE TWO mortgage companies!!
When I get ready to purchase my next home I am going to use a VA home loan, 0 down and low monthly payments, that is the way to go if you are a VETERAN.
Even they said no, since my mortgage has been 1,600 or so a mo, while my retirement is just over 2,200 a mo.. So even they said “my income to debt ratio is too high for us..
EVEN THOUGH I HAD over 100k in the bank AND access to around 40k in stocks/bonds etc..
I had to liquidate a hell of a lot to buy the home all cash..
It must be really hard to write satire these days because the absurd is now reality.
When we bought our first home we scrimped and saved to be able to have a solid down payment, we bought a house less expensive than what we were approved for so that we didn’t go into more debt, and we both had solid credit scores. Now that would be punished.
We also saved and paid off our student loans which also seems to be something not cool to do anymore. What a mixed up country we live in. Punish those who have made sacrifices to not go into debt and who have worked to have solid credit scores.
My first home i bought, was while i was active duty, so i had my BAH to help pay for the mortgage.. When i retired, and moved up to columbus, i had to buy this how i am now in, ALL IN CASH, as none of the bloody mortgage lenders, would loan to me, due to my ‘debt to income’ ratio was too high..
AND THAT EVEN WAS WITH me having a 788 or so credit score.
SO how are these mortgage lenders, giving mortgages to these folks with under 600 credit scores/?
Where does Biden get the Authority to do stuff like this?
he is the king of america!
Maybe that is why he is not going to charles coronation. HE ALREADY considers himself a king, so won’t DEIGN to stoop to bow to a REAL king.