Feds Penalizing Home Buyers with Good Credit and Down Payments

[scotchtiger]

Several links below. A few excerpts below as well. @Willence How is the mortgage community reacting to this?

A little-noticed revamp of federal rules on mortgage fees will offer discounted rates for home buyers with riskier credit backgrounds — and force higher-credit homebuyers to foot the bill

Fannie Mae and Freddie Mac will enact changes to fees known as loan-level price adjustments (LLPAs) on May 1 that will affect mortgages originating at private banks nationwide

The result, according to industry pros: pricier monthly mortgage payments for most homebuyers — an ugly surprise for those who worked for years to build their credit, only to face higher costs than they expected as part of a housing affordability push by the US Federal Housing Finance Agency.

“It’s going to be a challenge trying to explain to somebody that says, ‘I worked my whole life for high credit and I’ve put a lot of money down and you’re telling me that’s a negative now?’ That’s a hard conversation to have.”

“It’s unprecedented,” added David Stevens, who served as Federal Housing Administration commissioner during the Obama administration. “My email is full from mortgage companies and CEOs [telling] me how unbelievably shocked they are by this move.”

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.

“This was a blatant and significant cut of fees for their highest-risk borrowers and a clear increase in much better credit quality buyers – which just clarified to the world that this move was a pretty significant cross-subsidy pricing change,” added Stevens, who is also the former CEO of the Mortgage Bankers Association.

How the US is subsidizing high-risk homebuyers — at the cost of those with good credit

Experts say an “unprecedented” overhaul of mortgage fees would result in higher payments for most buyers.

nypost.com

Biden to hike payments for good-credit homebuyers to subsidize high-risk mortgages

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.

www.washingtontimes.com

 

[okclem]

Oh...the horror of having to pay your fair share. Don't these government men understand your high income makes you a better and more valuable member of society?

 

[scotchtiger]

Oh...the horror of having to pay your fair share. Don't these government men understand your high income makes you a better and more valuable member of society?

LOLOLOLOLOLOLOLOL Fair Share. Predictable reply.

A fair share is a fee proportionate with the risk of your loan. That's fair. They are penalizing people who have made responsible financial decisions, worked hard to build their credit, and saved down payments in order to subsidize risky loans.

Wasn't there a time in the not-to-distant past when the government incentivized loans to high-risk borrowers? How did that work out?

Also note this quote: pricier monthly mortgage payments for most homebuyers. IE not just the 1%ers.

 

[BionicTiger]

Oh...the horror of having to pay your fair share. Don't these government men understand your high income makes you a better and more valuable member of society?

Hahaha. Solid troll. A little heavy handed, but not bad.

 

[BionicTiger]

I’m 35 with solid income - hardly super wealthy - but we’ve built a solid net worth. We’ve worked to save and have credit scores in the 800-810 range. It’s not difficult. It doesn’t make me special and I’m not that different than many my age with my credit history length. It isn’t something exclusive to the wealthy. Anyone can do it. It might be hard, at times, or require some discipline, but it isnt like getting there is impossible. Rewarding the higher risk borrowers at the expense of your least risky and likely most capable borrowers seems like a poor business decision.

 

[WapPride]

At first glance this looks like a terrible ****ing policy. Is it an attempt to curb individuals from purchasing multiple homes, or just a balancing act against higher risk mortgages?

 

[Willence]

Several links below. A few excerpts below as well. @Willence How is the mortgage community reacting to this?

A little-noticed revamp of federal rules on mortgage fees will offer discounted rates for home buyers with riskier credit backgrounds — and force higher-credit homebuyers to foot the bill

Fannie Mae and Freddie Mac will enact changes to fees known as loan-level price adjustments (LLPAs) on May 1 that will affect mortgages originating at private banks nationwide

The result, according to industry pros: pricier monthly mortgage payments for most homebuyers — an ugly surprise for those who worked for years to build their credit, only to face higher costs than they expected as part of a housing affordability push by the US Federal Housing Finance Agency.

“It’s going to be a challenge trying to explain to somebody that says, ‘I worked my whole life for high credit and I’ve put a lot of money down and you’re telling me that’s a negative now?’ That’s a hard conversation to have.”

“It’s unprecedented,” added David Stevens, who served as Federal Housing Administration commissioner during the Obama administration. “My email is full from mortgage companies and CEOs [telling] me how unbelievably shocked they are by this move.”

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.

“This was a blatant and significant cut of fees for their highest-risk borrowers and a clear increase in much better credit quality buyers – which just clarified to the world that this move was a pretty significant cross-subsidy pricing change,” added Stevens, who is also the former CEO of the Mortgage Bankers Association.

How the US is subsidizing high-risk homebuyers — at the cost of those with good credit

Experts say an “unprecedented” overhaul of mortgage fees would result in higher payments for most buyers.

nypost.com

Biden to hike payments for good-credit homebuyers to subsidize high-risk mortgages

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.

www.washingtontimes.com

This is all so insane. We've got this thing where we believe it's "fair" to force people who have worked hard and done things the way it's set up to do them to pay more of the costs for those who haven't. As though somehow higher risk borrowers are going to be a good investment. It's just not ever worked out that way. I can say that in my 25 years people who have low credit scores has dropped dramatically. In the late '90's to early 2000's, I did feel as though the credit scoring system was leaving a lot of people behind. But once people knew the rules of the game, the scores started to rise dramatically. It's yet another example of if we set up a system (and I hate our credit system) then people will adjust and work within the parameters needed to get what they want.

What's remarkable about these changes is they fly in the face of reality. Credit is tightening right now. It's going to continue to tighten most likely. It's become very obvious that our historically stupid Fed is determined to force people to lose their jobs before they'll understand the reality of our current economic situation. We already have massive inventory issues and instead of doing things like working to create a climate that will increase the supply of housing, we're just looking to add more borrower's to the mix. The challenge I see is that we're just going to increase fees which go to the servicing agencies and accomplish little else. Inventory is so low that almost everything is a competitive offer situation right now. That's not good for anyone on the buying side. Sellers are going to take the highest down payment/cash offer and the folks who are working in this more risky subset are still going to be left behind.

When inflation became such a concern, I didn't understand why we didn't look much harder at the supply component. We needed work to increase supply to help control inflation and of course, spending massive amounts of money at the government level with all these ridiculous bills we've passed has only made things infinitely worse. But that's another topic.

Going back to your original point, I've found over the years these kinds of changes are designed to get more fee income for Fannie and Freddie and little else. It isn't going to expand anything for higher risk borrowers. Instead, we should be doing things to help those folks understand and manage credit. We need to stop subsidizing failure and instead incentivize success. It's amazing how that's lost on so many people.

 

[Willence]

I’m 35 with solid income - hardly super wealthy - but we’ve built a solid net worth. We’ve worked to save and have credit scores in the 800-810 range. It’s not difficult. It doesn’t make me special and I’m not that different than many my age with my credit history length. It isn’t something exclusive to the wealthy. Anyone can do it. It might be hard, at times, or require some discipline, but it isnt like getting there is impossible. Rewarding the higher risk borrowers at the expense of your least risky and likely most capable borrowers seems like a poor business decision.

In 2020, I did loans for over 150 people who are TI members. The credit quality and financial health of the people I worked with was amazing. The average loan size was $295,000 so it's not like we're talking about rich people. I did 6 loans here that were $120k or less. If you create a system that people need to work within and expect them to do it, they will. It's just that simple. We should expect more of people, not less.

 

[scotchtiger]

At first glance this looks like a terrible ****ing policy. Is it an attempt to curb individuals from purchasing multiple homes, or just a balancing act against higher risk mortgages?

Direct from the Biden administration. It's a balance against higher risk mortgages to incentivize higher risk borrowers to take out loans. What could go wrong?

It's not much different than the extra taxes he tried to impose on hard-working successful families recently, in exchange for more entitlements.

But this time its directed squarely at the middle and upper middle classes and is a crystal clear penalty for being financially responsible. I can't imagine supporting this policy.

 

[scotchtiger]

In 2020, I did loans for over 150 people who are TI members. The credit quality and financial health of the people I worked with was amazing. The average loan size was $295,000 so it's not like we're talking about rich people. I did 6 loans here that were $120k or less. If you create a system that people need to work within and expect them to do it, they will. It's just that simple. We should expect more of people, not less.

I wasn’t able to work with you, but I think it was @Cocks are Number 1 that tipped me off to low jumbo rates at Regions and you weighed in. They were buying that market. I refi’d at 2.875% and man, what a deal looking back.

I’m in my forever home with a low mortgage, so this doesn’t affect me (unless it makes its way into rental properties), but it’s just a complete slap in the face to people who bust their ass to work hard and do the right thing.

 

[PawsFan_]

Oh...the horror of having to pay your fair share. Don't these government men understand your high income makes you a better and more valuable member of society?

Didn't learn much from the loose credit slick willie gave out that caused the real estate crash in 2008 did you?

 

[Willence]

I wasn’t able to work with you, but I think it was @Cocks are Number 1 that tipped me off to low jumbo rates at Regions and you weighed in. They were buying that market. I refi’d at 2.875% and man, what a deal looking back.

I’m in my forever home with a low mortgage, so this doesn’t affect me (unless it makes its way into rental properties), but it’s just a complete slap in the face to people who bust their ass to work hard and do the right thing.

Yes. It was painful but I had to pass about $8 million in deals on to that situation because it was so good. That hurt!! But I am so glad you got it and who knows, maybe we can work together in the future!

 

[kgwillison]

Ok, I know this issue well because housing policy is my profession.

Some thoughts:

1) Fannie and Freddie are for all intents and purposes agents of the federal government. They are in conservatorship. As such, they are required to meet mission and goals designed to increase lending to lower-income households. The changes in the upfront fees for higher risk loans is designed to require Fannie and Freddie to meet those obligations.

2) The underwriting of loans is far more stringent today than in the mid-aughts. There really are no predatory loans being offered by lenders. No “no income, no asset” loans being made.

3) The same change that reduced upfront fees for higher risk loans and marginally increased fees for higher quality loans placed a premium on loans with debt-to-income ratios over 40%. That will include many of the borrowers who would have had their fees reduced.

There are many, if not most, of TI readers who are strongly opposed to government involvement in almost everything. Well, one way to reduce government involvement in housing is to reduce the population of loans mortgage lenders sell to Fannie Mae and Freddie Mac. Yes, you will likely pay higher mortgage rates (even higher than the new rates would be under the changes initiated by the Federal Housing Finance Agency) but you will walk away feeling good that you are not adding any risk to the federal government.

 

[scotchtiger]

Ok, I know this issue well because housing policy is my profession.

Well, one way to reduce government involvement in housing is to reduce the population of loans mortgage lenders sell to Fannie Mae and Freddie Mac. Yes, you will likely pay higher mortgage rates (even higher than the new rates would be under the changes initiated by the Federal Housing Finance Agency) but you will walk away feeling good that you are not adding any risk to the federal government.

So we have a DC lobbyist in housing policy advocating to avoid Fannie and Freddie mortgages by paying even more money, and suggesting that someone should feel good about that extra money spent.

This may be a worse example of the absurdity and incompetence in our governmental system than even the original topic legislated by the Biden administration.

I’m not going to feel good in any way shape or form if more money is taken from me by a government policy, or to avoid a government policy. Either way, dumbasses in DC took money from my family.

 

[BionicTiger]

Ok, I know this issue well because housing policy is my profession.

Some thoughts:

1) Fannie and Freddie are for all intents and purposes agents of the federal government. They are in conservatorship. As such, they are required to meet mission and goals designed to increase lending to lower-income households. The changes in the upfront fees for higher risk loans is designed to require Fannie and Freddie to meet those obligations.

2) The underwriting of loans is far more stringent today than in the mid-aughts. There really are no predatory loans being offered by lenders. No “no income, no asset” loans being made.

3) The same change that reduced upfront fees for higher risk loans and marginally increased fees for higher quality loans placed a premium on loans with debt-to-income ratios over 40%. That will include many of the borrowers who would have had their fees reduced.

There are many, if not most, of TI readers who are strongly opposed to government involvement in almost everything. Well, one way to reduce government involvement in housing is to reduce the population of loans mortgage lenders sell to Fannie Mae and Freddie Mac. Yes, you will likely pay higher mortgage rates (even higher than the new rates would be under the changes initiated by the Federal Housing Finance Agency) but you will walk away feeling good that you are not adding any risk to the federal government.

Christ on a tricycle.

 

[Hammerdawg.NEAR]

I’m 35 with solid income - hardly super wealthy - but we’ve built a solid net worth. We’ve worked to save and have credit scores in the 800-810 range. It’s not difficult. It doesn’t make me special and I’m not that different than many my age with my credit history length. It isn’t something exclusive to the wealthy. Anyone can do it. It might be hard, at times, or require some discipline, but it isnt like getting there is impossible. Rewarding the higher risk borrowers at the expense of your least risky and likely most capable borrowers seems like a poor business decision.

Whoa, pump the brakes scooter, we can’t have any talk of personal responsibility and sound decision making. We only deal in outrage and victimhood around here

 

[Hammerdawg.NEAR]

Ok, I know this issue well because housing policy is my profession.

Some thoughts:

1) Fannie and Freddie are for all intents and purposes agents of the federal government. They are in conservatorship. As such, they are required to meet mission and goals designed to increase lending to lower-income households. The changes in the upfront fees for higher risk loans is designed to require Fannie and Freddie to meet those obligations.

2) The underwriting of loans is far more stringent today than in the mid-aughts. There really are no predatory loans being offered by lenders. No “no income, no asset” loans being made.

3) The same change that reduced upfront fees for higher risk loans and marginally increased fees for higher quality loans placed a premium on loans with debt-to-income ratios over 40%. That will include many of the borrowers who would have had their fees reduced.

There are many, if not most, of TI readers who are strongly opposed to government involvement in almost everything. Well, one way to reduce government involvement in housing is to reduce the population of loans mortgage lenders sell to Fannie Mae and Freddie Mac. Yes, you will likely pay higher mortgage rates (even higher than the new rates would be under the changes initiated by the Federal Housing Finance Agency) but you will walk away feeling good that you are not adding any risk to the federal government.

What’s the cure for all the problems the govt has us in? Why that would be more government! Of course!

 

[acwill07]

Ok, I know this issue well because housing policy is my profession.

Some thoughts:

1) Fannie and Freddie are for all intents and purposes agents of the federal government. They are in conservatorship. As such, they are required to meet mission and goals designed to increase lending to lower-income households. The changes in the upfront fees for higher risk loans is designed to require Fannie and Freddie to meet those obligations.

2) The underwriting of loans is far more stringent today than in the mid-aughts. There really are no predatory loans being offered by lenders. No “no income, no asset” loans being made.

3) The same change that reduced upfront fees for higher risk loans and marginally increased fees for higher quality loans placed a premium on loans with debt-to-income ratios over 40%. That will include many of the borrowers who would have had their fees reduced.

There are many, if not most, of TI readers who are strongly opposed to government involvement in almost everything. Well, one way to reduce government involvement in housing is to reduce the population of loans mortgage lenders sell to Fannie Mae and Freddie Mac. Yes, you will likely pay higher mortgage rates (even higher than the new rates would be under the changes initiated by the Federal Housing Finance Agency) but you will walk away feeling good that you are not adding any risk to the federal government.

I’m trying to decide whether or not this is really a serious post.

 

[Cocks are Number 1]

Oh...the horror of having to pay your fair share. Don't these government men understand your high income makes you a better and more valuable member of society?

So angry, all of the time.

 

[Cocks are Number 1]

Didn't learn much from the loose credit slick willie gave out that caused the real estate crash in 2008 did you?

Is Barney still around?

 

[kgwillison]

So we have a DC lobbyist in housing policy advocating to avoid Fannie and Freddie mortgages by paying even more money, and suggesting that someone should feel good about that extra money spent.

This may be a worse example of the absurdity and incompetence in our governmental system than even the original topic legislated by the Biden administration.

I’m not going to feel good in any way shape or form if more money is taken from me by a government policy, or to avoid a government policy. Either way, dumbasses in DC took money from my family.

We are clearly not going to agree on much but it is clear you think government should be supporting housing by providing interest rates that are lower than what the private sector, alone, can offer. So, you support government subsidies.

My point here is that if government is providing subsidies, it should be targeted toward borrowers most in need of the subsidy. To pay for that subsidy, more affluent borrowers should bear the costs.

If the government is to be involved in lowering interest rates, the benefits should not all accrue to those borrowers who are the lowest risk ones. That's not the purpose of government. We have a progressive tax system so that lower wage workers pay less than higher earning ones. Same concept here.

Again, if you don't believe that Freddie Mac and Fannie Mae should buy your loan, get your home loan from a bank that will portfolio it.

 

[scotchtiger]

We are clearly not going to agree on much but it is clear you think government should be supporting housing by providing interest rates that are lower than what the private sector, alone, can offer. So, you support government subsidies.

My point here is that if government is providing subsidies, it should be targeted toward borrowers most in need of the subsidy. To pay for that subsidy, more affluent borrowers should bear the costs.

If the government is to be involved in lowering interest rates, the benefits should not all accrue to those borrowers who are the lowest risk ones. That's not the purpose of government. We have a progressive tax system so that lower wage workers pay less than higher earning ones. Same concept here.

Again, if you don't believe that Freddie Mac and Fannie Mae should buy your loan, get your home loan from a bank that will portfolio it.

But this isn’t based on income. It’s based on credit score, or said differently, financial responsibility.

So this policy penalizes lower and middle income people who have worked diligently to build good credit. That’s wrong.

In fact, I saw a chart that showed the penalties are most severe for borrowers in the low-mid 700s with the penalty declining as you approach and move into the 800s. So to your point about penalizing affluence and progressive tiers, this doesn’t appear to achieve that. It hurts the responsible members of the middle class.

FWIW, I have double digit properties that are in portfolio loans. I have one (my personal residence) that I assume may be Frannie/Freddie.

Edit: Let me also add that the actual affluent people won’t be hurt nearly as badly as middle income, and younger people starting out. Affluent people have really strong equity positions and are usually putting significant amounts of money down on homes, limiting the amount that is mortgaged. They also often have access to portfolio loans not only through a traditional bank, but from institutions like Morgan Stanley and others.

Even at age 39, his policy would have very limited effect on me. But it would have been very impactful to 32 or 28 year old me.

So to recap, this is absolute shit policy.

 

[gardentiger]

I’m 35 with solid income - hardly super wealthy - but we’ve built a solid net worth. We’ve worked to save and have credit scores in the 800-810 range. It’s not difficult. It doesn’t make me special and I’m not that different than many my age with my credit history length. It isn’t something exclusive to the wealthy. Anyone can do it. It might be hard, at times, or require some discipline, but it isnt like getting there is impossible. Rewarding the higher risk borrowers at the expense of your least risky and likely most capable borrowers seems like a poor business decision.

It's not a business decision. It's a government mandate. The difference will be made up of fewer people buying in the healthy category. And more risky buying in the bad credit category. I appreciate the fact that our elites want people to own their own home. But, do they?
They've always wanted the government to own it all. A lot of these risky borrowers will foreclose and Blackrock etc will be there to lap it up. They are a functioning arm of the govt.

 

[kgwillison]

But this isn’t based on income. It’s based on credit score, or said differently, financial responsibility.

So this policy penalizes lower and middle income people who have worked diligently to build good credit. That’s wrong.

In fact, I saw a chart that showed the penalties are most severe for borrowers in the low-mid 700s with the penalty declining as you approach and move into the 800s. So to your point about penalizing affluence and progressive tiers, this doesn’t appear to achieve that. It hurts the responsible members of the middle class.

FWIW, I have double digit properties that are in portfolio loans. I have one (my personal residence) that I assume may be Frannie/Freddie.

Edit: Let me also add that the actual affluent people won’t be hurt nearly as badly as middle income, and younger people starting out. Affluent people have really strong equity positions and are usually putting significant amounts of money down on homes, limiting the amount that is mortgaged. They also often have access to portfolio loans not only through a traditional bank, but from institutions like Morgan Stanley and others.

Even at age 39, his policy would have very limited effect on me. But it would have been very impactful to 32 or 28 year old me.

So to recap, this is absolute shit policy.

Actually, under FHFA’s new pricing policies, borrowers who qualify for the GSEs’ affordable housing loan products will be exempt from upfront loan fees. So the new pricing won’t hurt them, it will help them.

I work for a private company that uses risk-based pricing. And that is an appropriate role for private companies. That’s not necessarily the case for government-insured loans, although FHFA recognized that borrowers with debt to income ratios above 40% should pay a premium. The mortgage industry is fighting that change (and there are good reasons there should be adjustments to it).

 

[kgwillison]

Several links below. A few excerpts below as well. @Willence How is the mortgage community reacting to this?

A little-noticed revamp of federal rules on mortgage fees will offer discounted rates for home buyers with riskier credit backgrounds — and force higher-credit homebuyers to foot the bill

Fannie Mae and Freddie Mac will enact changes to fees known as loan-level price adjustments (LLPAs) on May 1 that will affect mortgages originating at private banks nationwide

The result, according to industry pros: pricier monthly mortgage payments for most homebuyers — an ugly surprise for those who worked for years to build their credit, only to face higher costs than they expected as part of a housing affordability push by the US Federal Housing Finance Agency.

“It’s going to be a challenge trying to explain to somebody that says, ‘I worked my whole life for high credit and I’ve put a lot of money down and you’re telling me that’s a negative now?’ That’s a hard conversation to have.”

“It’s unprecedented,” added David Stevens, who served as Federal Housing Administration commissioner during the Obama administration. “My email is full from mortgage companies and CEOs [telling] me how unbelievably shocked they are by this move.”

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.

“This was a blatant and significant cut of fees for their highest-risk borrowers and a clear increase in much better credit quality buyers – which just clarified to the world that this move was a pretty significant cross-subsidy pricing change,” added Stevens, who is also the former CEO of the Mortgage Bankers Association.

How the US is subsidizing high-risk homebuyers — at the cost of those with good credit

Experts say an “unprecedented” overhaul of mortgage fees would result in higher payments for most buyers.

nypost.com

Biden to hike payments for good-credit homebuyers to subsidize high-risk mortgages

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.

www.washingtontimes.com

By the way, above you quote Dave Stevens, who is a good friend of mine and someone I’ve known for nearly 25 years.

I recently interviewed Dave for my PolicyCast podcast. He’s a great interview. We talked about the loan level price adjustments. You can view it here:

PolicyCast: Housing’s Big Picture

Industry veteran Dave Stevens joins the Arch MI PolicyCast to talk about predictions and perspectives for 2023’s mortgage market and thoughts on where the GSEs need to focus their affordable housing initiatives.

mortgage.archgroup.com

 

[scotchtiger]

Actually, under FHFA’s new pricing policies, borrowers who qualify for the GSEs’ affordable housing loan products will be exempt from upfront loan fees. So the new pricing won’t hurt them, it will help them.

I work for a private company that uses risk-based pricing. And that is an appropriate role for private companies. That’s not necessarily the case for government-insured loans, although FHFA recognized that borrowers with debt to income ratios above 40% should pay a premium. The mortgage industry is fighting that change (and there are good reasons there should be adjustments to it).

Does this look accurate for income qualifications for GSEs? It's from Freddie Mac's website.

Qualifying income is limited to 80% of Area Median Income (AMI), effective July 28, 2019. There are no geographic limits on loan amounts. Use the Home Possible Income & Property Eligibility Toolto see income limits for specific properties or submit to Loan Product Advisor® to determine Home Possible income eligibility.

If so, my point remains. This penalizes many people in middle and upper middle income ranges, as well as young people starting out who find themselves in these income ranges.

Here are more specifics using their tool. The 80% threshold in Park Circle in N. Charleston (a nice area with lots of young families) is $77K. What you are saying is that you emphatically support a family of 5 with two school teacher parents making $85K paying more for their mortgage. Is that accurate?

County: Charleston County
FIPS Code 45019003600
Home Possible Income Limit: $77,120
100% Median Income: $96,400
80% Area Median Income: $77,120
50% Area Median Income: $48,200
High Needs Rural Tract: No
Rural Tract: No
High Cost Area: No

 

[kgwillison]

Here is my point: if it is rational that Government Sponsored Enterprises exist to expand homeownership among borrowers who have historically been shut out of buying homes (due to discrimination, income, geography, etc.) then it is also rational that loans made to them be cross subsidized.

The GSEs are required to purchase a certain share of “affordable loans” and loans in high-minority/low income census tracts. Their ROI on those loans is less than it would be if they were in the purely private sector.

Therefore, to ensure the GSEs have sufficient capital and provide a fair rate of return, cross subsidization is necessary.

One can argue whether the cross subsidy should be limited to investor properties or vacation homes, jumbo or high-balance loans … or limited to people who make 150% of AMI … but it is necessary and (I think) appropriate for agencies backed by the US taxpayer charged with expanding home ownership.

Perhaps a bigger question is whether Fannie and Freddie should be buying loans in high cost areas exceeding $1 million? It wasn’t long ago that the cut off for purchasing loans was a little over $400k. It was the mortgage industry (not Democrats) who pushed those limits up.

 

[dbjork6317]

Several links below. A few excerpts below as well. @Willence How is the mortgage community reacting to this?

A little-noticed revamp of federal rules on mortgage fees will offer discounted rates for home buyers with riskier credit backgrounds — and force higher-credit homebuyers to foot the bill

Fannie Mae and Freddie Mac will enact changes to fees known as loan-level price adjustments (LLPAs) on May 1 that will affect mortgages originating at private banks nationwide

The result, according to industry pros: pricier monthly mortgage payments for most homebuyers — an ugly surprise for those who worked for years to build their credit, only to face higher costs than they expected as part of a housing affordability push by the US Federal Housing Finance Agency.

“It’s going to be a challenge trying to explain to somebody that says, ‘I worked my whole life for high credit and I’ve put a lot of money down and you’re telling me that’s a negative now?’ That’s a hard conversation to have.”

“It’s unprecedented,” added David Stevens, who served as Federal Housing Administration commissioner during the Obama administration. “My email is full from mortgage companies and CEOs [telling] me how unbelievably shocked they are by this move.”

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.

“This was a blatant and significant cut of fees for their highest-risk borrowers and a clear increase in much better credit quality buyers – which just clarified to the world that this move was a pretty significant cross-subsidy pricing change,” added Stevens, who is also the former CEO of the Mortgage Bankers Association.

How the US is subsidizing high-risk homebuyers — at the cost of those with good credit

Experts say an “unprecedented” overhaul of mortgage fees would result in higher payments for most buyers.

nypost.com

Biden to hike payments for good-credit homebuyers to subsidize high-risk mortgages

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.

www.washingtontimes.com

Policies like this make me wish the Republicans could put forth a serious candidate that I could stomach voting for instead of this parade of post truth fascists they keep cycling through.

 

[scotchtiger]

Here is my point: if it is rational that Government Sponsored Enterprises exist to expand homeownership among borrowers who have historically been shut out of buying homes (due to discrimination, income, geography, etc.) then it is also rational that loans made to them be cross subsidized.

The GSEs are required to purchase a certain share of “affordable loans” and loans in high-minority/low income census tracts. Their ROI on those loans is less than it would be if they were in the purely private sector.

Therefore, to ensure the GSEs have sufficient capital and provide a fair rate of return, cross subsidization is necessary.

One can argue whether the cross subsidy should be limited to investor properties or vacation homes, jumbo or high-balance loans … or limited to people who make 150% of AMI … but it is necessary and (I think) appropriate for agencies backed by the US taxpayer charged with expanding home ownership.

Perhaps a bigger question is whether Fannie and Freddie should be buying loans in high cost areas exceeding $1 million? It wasn’t long ago that the cut off for purchasing loans was a little over $400k. It was the mortgage industry (not Democrats) who pushed those limits up.

So after all these posts, we are in agreement that this policy from the Biden administration penalizes responsible members of the middle class.

Let's just be clear on that point. The party of the middle class is willfully enacting policy that hurts that group, and also makes first time home ownership harder for responsible members of this group.

All of your thoughts on how GSEs should or need to operate (which is just more lefty redistribution) doesn't change this.

I also think the government should represent all taxpayers. Why should beneficial programs exclude buyers of $1M+ homes? They are meaningful contributors to society, the economy, and important to this conversation, the tax base and deserve inclusion.

 

[kgwillison]

No, I think we have an honest disagreement on priority. If you think that the government should be subsidizing interest rates for borrowers of $1 million mortgages, then you see nothing wrong with them subsidizing mortgages for people taking out $25 million mortgages.

I disagree.

I think there is a role for government to play in advancing homeownership opportunities for low- and moderate-income families. Less sure we need government subsidized loans for everyone.

There are costs and benefits to using the GSEs. Even middle class borrowers who will pay - slightly - more in payments are getting a lower interest rate than they would otherwise receive from the private-label market. It still is subsidized (because of the implicit guarantee that the US government will stand behind the mortgage backed securities owned by the GSEs), just not as much as it would have been before the loan level price adjustments were made.

 

[scotchtiger]

If you think that the government should be subsidizing interest rates for borrowers of $1 million mortgages, then you see nothing wrong with them subsidizing mortgages for people taking out $25 million mortgages.

That's a leap. Plenty of regular people have $1M mortgages. I do. You can hardly buy a decent house in Mt. Pleasant right now without spending well over $1M. $25M is a totally different stratosphere - and people buying those homes aren't getting traditional mortgages.

I think there is a role for government to play in advancing homeownership opportunities for low- and moderate-income families. Less sure we need government subsidized loans for everyone.

Okay. So why did the government just make it more expensive for moderate income families to purchase a home?

 

[PawsFan_]

Plenty of regular people have $1M mortgages. I do. You can hardly buy a decent house in Mt. Pleasant right now without spending well over $1M.

Regular people?

Payment (P&I only) on a $1Mil dollar mortgage would be over $6k a month. Average salary in SC is $47k or Around $4K a month before taxes. Top earners in SC make about $75K.

In the US, if you have a net worth over a $1 million, you are in the top 10% of society.

Congrats, but regular people don't have million dollar mortgages.

 

[scotchtiger]

Regular people?

Payment (P&I only) on a $1Mil dollar mortgage would be over $6k a month. Average salary in SC is $47k or Around $4K a month before taxes. Top earners in SC make about $75K.

In the US, if you have a net worth over a $1 million, you are in the top 10% of society.

Congrats, but regular people don't have million dollar mortgages.

I didn't say average. I said regular. Plenty of regular people that I know have $1M mortgages. See the quote in the other thread about average people...

Take a poke around Zillow for Mt. Pleasant, SC. Plenty of regular people live here (around 93,000 people). Plenty of houses that are in the $1M, $2M and $3M+ range. Thousands and thousands of homes > $1M. Pretty much every home in my regular neighborhood would sell for > $1M.

That's very different than the other number included, $25M. I don't know anyone personally who has a $25M mortgage. That's PJ/yacht/etc wealth.

 

[kgwillison]

A home selling for $1 million does not mean $1 million mortgage. Most everyone buying $1 million+ homes are putting down at least 20% if not more.

But it still begs the question as to whether government taxpayers - few of whom have $1 million homes - should be subsidizing home mortgages on houses exceeding $1 million in value.

And to be clear, the pricing changes announced by FHFA do not mean moderate to wealthy high-credit borrowers will pay more than poor-credit borrowers. It just means the difference between the upfront fees they paid before the change will be less severe than they have been.

 

[jakefest]

A home selling for $1 million does not mean $1 million mortgage. Most everyone buying $1 million+ homes are putting down at least 20% if not more.

But it still begs the question as to whether government taxpayers - few of whom have $1 million homes - should be subsidizing home mortgages on houses exceeding $1 million in value.

And to be clear, the pricing changes announced by FHFA do not mean moderate to wealthy high-credit borrowers will pay more than poor-credit borrowers. It just means the difference between the upfront fees they paid before the change will be less severe than they have been.

It's another tax on the wealthy/middle class to subsidize the lower economic section of the income tax bracket so high risk mortgages can be better backstopped by the govt without burdening forecasted budgets.

You could undo the govt backing of jumbo loans north of $1m but I think you'd find not many would lend without at least 8-10% interest rates to offset the risk. That would tank the market, with knock on downward pressure on lumber, concrete, building materials, etc, which impact markets, labor/unemployment etc.

The wealthy aren't borrowing presently, 3 houses near me have sold for north of $1.8m, all were all cash deals. So the wealthy aren't borrowing and the middle/lower brackets won't get approved at current rates. Quite the conundrum.

 

[TigerGrowls]

Another bad part of this deal is its being enacted by govt decree which is not right imo.

 

[scotchtiger]

It's another tax on the wealthy/middle class to subsidize the lower economic section of the income tax bracket so high risk mortgages can be better backstopped by the govt without burdening forecasted budgets.

You could undo the govt backing of jumbo loans north of $1m but I think you'd find not many would lend without at least 8-10% interest rates to offset the risk. That would tank the market, with knock on downward pressure on lumber, concrete, building materials, etc, which impact markets, labor/unemployment etc.

The wealthy aren't borrowing presently, 3 houses near me have sold for north of $1.8m, all were all cash deals. So the wealthy aren't borrowing and the middle/lower brackets won't get approved at current rates. Quite the conundrum.

Yep. Another tax on the group actually funding this country.

Btw, here’s a million dollar house in Mt. Pleasant… 1655 square foot ranch. Absolutely nothing special.

https://www.zillow.com/homedetails/...ssage&utm_medium=referral&utm_source=txtshare

 

[jakefest]

Yep. Another tax on the group actually funding this country.

Btw, here’s a million dollar house in Mt. Pleasant… 1655 square foot ranch. Absolutely nothing special.

https://www.zillow.com/homedetails/...ssage&utm_medium=referral&utm_source=txtshare

We were outbid on two homes there in the last 18 months. We made cash offers each time and still got outbid.

 

[scotchtiger]

We were outbid on two homes there in the last 18 months. We made cash offers each time and still got outbid.

Sat next to a guy on a flight back from the Bahamas that was trying to buy a house on Sullivans. He bid $6.8M, cash, was over list and lost by $200K. Interior lot - no beach or water views. Wild times.

 

[PalmettoTiger1]

Whoa, pump the brakes scooter, we can’t have any talk of personal responsibility and sound decision making. We only deal in outrage and victimhood around here

I am amazed at the passionate level some hit on here with why I should completely conform to their every wish