A new federal rule that took effect on May 1st from the Biden Administration says homebuyers with good credit scores will soon be paying higher mortgage rates & fees to subsidize people with riskier credit ratings who are also in the market to a buy home. According to the Washington Times, the new fee is part of the push for more for affordable housing and the new rule will affect mortgages originating at private banks across the nation. According to the report, homebuyers with credit scores of 680 or higher will pay roughly $40 per month more on a home loan of $400k. In addition, buyers with down payments of 15% to 20% will get hit with the highest fees.
“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.”
The Wall Street Journal, in a recent editorial titled “Upside Down Mortgage Policy; A new federal housing rule will make reliable borrowers subsidize risky loans,” summed it up by saying:
“The biggest problem here is fairness. Taxpayers already subsidize mortgages for low-income borrowers through the Federal Housing Administration. Now they want to punish those who have maintained good credit while rewarding those who haven’t. In the name of making housing more equal, they are pursuing an inequitable policy.”