A new rule from the Biden Administration is set to take effect and will majorly impact homeowners with good credit.
Fox News reports that this rule will cause those with good credit to pay more on their mortgages to subsidize those with poor credit. Experts find that under this new rule, those with a credit score of 680 would pay approximately $40 more per month on their mortgage of $400,000.
The new rule from the Federal Housing Finance Agency is set to take effect on May 1. The Washington Times reports that this new rule will redistribute the mortgage cost for someone with good credit. It will cost them more on their mortgage to lessen the burden slightly on those with fair or poor credit.
The changes do not make sense. Penalizing borrowers with larger down payments and credit scores will not go over well, said Ian Wright, a Bay Equity Home Loans loan officer, when speaking with the New York Times. He also said: 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 Federal Housing Finance Agency oversees federally-backed mortgage companies, Fannie Mae and Freddie Mac. These lenders are often interested in finding new wells of customers that they can lend to. However, even industry employees feel these new rules will confuse and frustrate people.
This confusing approach wont work and more importantly, couldnt come at a worse time for an industry struggling to get back on its feet after these past 12 months, wrote David Stevens, a former commissioner of the Federal Housing Administration during the Obama years. Stevens also wrote on social media: To do this at the onset of the spring market is almost offensive to the market, consumers, and lenders.
Several interest rate increases by the Federal Reserve have caused the mortgage market to get shaken up in recent months anyway. The new rules will allow buyers with a lower credit score and less of a down payment to qualify for larger mortgages than they would have before. That might seem to benefit them, but it may also mean they get into mortgages they cannot truly afford. Worse yet, those mortgages are subsidized by buyers with good credit and larger down payments.
Login