Joe Biden Wants Homebuyers With Good Credit to Subsidize High Risk Mortgages
“The changes do not make sense. Penalizing borrowers with larger down payments and credit scores will not go over well”
The Biden administration wants to penalize homebuyers with good credit, in order to subsidize high risk buyers. This isn’t exactly like what led to the subprime mortgage crisis, but it’s just as stupid and certainly unfair.
It’s just another front on the war on merit.
The Washington Times reports:
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.
The fee changes will go into effect May 1 as part of the Federal Housing Finance Agency’s push for affordable housing, and they will affect mortgages originating at private banks across the country. The federally backed home mortgage companies Fannie Mae and Freddie Mac will enact the loan-level price adjustments, or LLPAs.
Mortgage industry specialists say homebuyers with credit scores of 680 or higher will pay, for example, about $40 per month more on a home loan of $400,000. Homebuyers who make down payments of 15% to 20% will get socked with the largest fees.
The new fees will apply only to Americans buying houses or refinancing after May 1.
Lenders and real estate agents say the changes will frustrate homebuyers with high credit scores and homeowners seeking to refinance because the rule punishes them for their relatively strong financial positions.
“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 Olean Times Herald has more and even mentions our old friends Fannie Mae and Freddie Mac:
Punishing Americans with good credit
The Biden administration wants homebuyers who have good credit to cover the risks of lending to homebuyers who don’t. Congressional Republicans should stand united against this latest White House effort to erode the value of personal responsibility.
The New York Post reported this week that Fannie Mae and Freddie Mac are prepared to overhaul the fees built into mortgages issued at private banks. The charges — known as low-level price adjustments — are based on a handful of factors and often absorbed into a buyer’s mortgage rate.
Under the Biden plan, those with better credit scores would face additional surcharges while those with substandard credit scores would see fees cut nearly in half.
“When absorbed into a long-term mortgage rate, the increase is the equivalent of slightly less than a quarter percentage point in mortgage rate,” the Post reported in reference to buyers with higher credit ratings. “On a $400,000 loan with a 6 percent mortgage rate, that buyer could expect their monthly payment to rise by about $40.”
That’s nearly $14,400 over the life of a traditional 30-year mortgage.
This is such a bad idea.
Absolute insanity. Biden is making responsible people who pay their bills on time and have high credit scores pay higher mortgage rates to subsidize loans for people with low credit ratings who don’t pay bills on time. The war on merit continues pic.twitter.com/DR1Bh2AoEk
— Marc Thiessen 🇺🇸❤️🇺🇦&🇹🇼 (@marcthiessen) April 19, 2023
Do we learn nothing from history?
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“Joe Biden Wants Homebuyers With Good Credit to Subsidize High Risk Mortgages”
Joe Biden can pound salt.
“From each according to his ability, to each according to his needs”
(German: Jeder nach seinen Fähigkeiten, jedem nach seinen Bedürfnissen)
I think this is illegal, because of the fair lending act? Loan discrimination?
Not when it favors the Historically Under-Represented or whatever the latest catch-phrase is for 13% of the population.
I have been judicious in my spending habits and use of credit over the years; that is why I am sitting well north of 800. I guess I must be punished when I go for the bridge loan I may need in the next few months.
How they arrive at a credit rating baffles me … credit debt increases – say for putting $1k on my HomeDepot card for a new appliance, it goes down. Pay the same off the month after it’s incurred, it goes down because I didn’t pay it off over time. Finally I seem to have discovered the secret of keeping it >800 – I got tired of Amazon debiting my ATM card (checking) piece meal for a multi-item order because it wreaked havoc on my accounting spreadsheet – turning one cume charge into up to a half dozen charges for a 6 item order. Finally I just started using my Visa credit card and pay that every month in full. That seems pleasing to the credit score keepers to demonstrate the disciplined use of credit.
Unless it is a huge purchase, I pay off my credit cards to zero every month. One way I establish a revolving payment history is this: when, for example, I need tires, I buy on “6 months same as cash!”, and pay it to zero in five months.
If my need for a bridge loan comes to pass (long story) I will need appliances for the new house. I have the money set aside and then some, but will STILL use a “[time in months] same as cash!” gimmick, and pay it off before the time limit is up.
Griz – a guy’s gotta eat, right? Are you still in E. Tenn?
MrE: yes.
I’ve been told that having a lot of credit card line availability without using it is actually interpreted well in a credit score. Paying off your full balances each month also helps a lot.
I also heard that the “no interest financing” cards from places like home depot and best buy make you a credit risk for fraud or something.
It’s a tradeoff, like everything else. Keeping headroom on your cards is considered positive. But having too much credit lying around continuously that you’re not using is considered negative. Closing a card that you rarely use can actually boost your score.
Several years ago, I took out a zero-interest for a year card to pay my part of a total shoulder replacement. The banker said we could probably get $5-6k limit – then looked up my credit score and remarked “holy sh!t” – you can have $20k if you want “sir”. I had it paid off in less than 6 months – when our HCSM (Health Care Sharing Ministry) reimbursement came through.
The Homedepot card was helpful during this house ‘flip’ – longest we carried a debt was 4 months, for all new appliances – never paid a cent of interest. We don’t need it now – nor the other card I used for the shoulder. I’ve been told they can lower your rating for having TOO MUCH available credit. Like suddenly we’d go bat$h!t crazy and run all our cards up to the max then move to a sanctuary state … 😉
The way it was explained to me is that they aren’t really rating you in terms of “risk”. That would mean a high credit rating means you always pay your bills. Simple enough.
What they’re rating you on is profit potential. If you always pay your bills but you do so in a way that you avoid interest charges (pay off your credit cards every month) your rating won’t be as high as it would be if you carried a balance and paid interest every month.
If you’ve got a million dollars in a savings account, and have never taken out a loan, you will have a crap credit rating. Not because they don’t think you’ll pay back a loan, but because they don’t think they can wheedle any interest payments out of you.
I’m sure that’s an oversimplification, but that explanation makes more sense in light of my credit rating over the years than anything else I’ve ever heard.
Q: Would you even care about your credit rating if you had a Mil in the bank?!? 😉
As someone who pays his cards off to zero every month without fail, I can tell you it doesn’t work that way. Although they like to see “experience paying recent non-mortgage installment loans (such as auto or student loans),” if that is your ONLY strike, you can get up as high as to within 15 points of the ceiling.
To Mr.E, below — even wealthy people often make prudent use of credit, for financial flexibility. There are times where it makes much more financial sense to obtain a loan than to pay cash.
A quick example would be if your investment portfolio is yielding ~4% in dividends and/or bond interest, and, you can obtain a loan at an interest rate of less than 4%, You’re not going to liquidate your investments to pay cash when the income yield is higher than the loan interest rate, and, when you have ample cash flow to make the monthly payments.
My credit rating was also well north of 800 – 845, to be exact – but Experian plays games with the numbers. They’ll drop the score 25 points for no particular reason, then after awhile they’ll kick it back up. They do some other weird things. My score has taken a couple of hits for no apparent reason at all, plus when I paid off my car, my score took about a 20 point hit, and when I paid off my mortgage, it dropped around 40 points, putting me way down around 775. All that tells me is that their ratings are arbitrary and subject to manipulation, all of which is out of your own control.
I’ll test that in about a month … the Ill-annoy house is up for sale and likely headed to a bidding war – expecting to pay off the loan end of May. I doubt the bank will be unhappy since it’s something like a 3% loan.
PS – Experian does the same to us – only reason I have it is Homedepot compromised our account so we got signed up for credit monitoring for free. As often as that happens any more, we’ll likely have free credit reporting for the rest of our lives. 😉
I’ve got a free account with Experian, also, although every time they send me anything, they send along a push to upgrade to a paid account.
This strikes me as effectively a national sales tax, but only on certain homes. Isn’t only Congress empowered to enact taxes? Did this “rule” go through the rule making process laid out in the Administrative Procedures Act? I wonder how many lawsuits are going to challenge this.
You’re so cute – you actually think they care about picayune things like legality. How quaint.
“Only the little people pay taxes”…and obey the law, apparently.
They’ll package the high risk mortgages into securities and sell them to pension funds.
AKA “How we blew up the credit market and blamed it on Bush”, by Bill Clinton.
The original red-lining complaint was bogus because you have to show that the banks are passing up profitability in not lending in certain areas. The same mistake is in the rhetoric now after 30 years of it.
I bought into that story until I had a conversation with a friend’s uncle. He was a mortgage broker. The only REAL redlining involved mortgages on business property in areas known for, uhm, “civil unrest” and the risks that businesses would end up having to walk away from the smoldering ruins. As for home loans? “If Tyrone Washington has a good credit score, he gets the same loan as Michael White or Sam Eisenstein.”
But you don’t understand. Things like “having a job”, “paying your bills”, “being on time”, etc are characteristics of white supremacy.
Valuing those traits over the traits of inner-city black culture is racist, so it’s obviously the same thing as “redlining”.
Maybe worse.
This is oure Marxism
I’m wondering if this isn’t effectively an income tax, something only Congress can mandate.
Do we learn nothing from history? No. “The changes do not make sense”. Yes they do once a reader leaves the world of ‘sense’. This proposal makes perfect sense to Joe Biden, his administration and the Democrat Party. We on the right will argue from the point of view of sense, logic and fairness. Democrats are not at all concerned with any of that. They have other goals. Oppose them and their campaigns will revert to their norm: Republicans hate the poor, they hate fairness, they hate etc etc.
Is the Biden Admin taking over the primary duty of the federal government’s legislative branch? Doesn’t Congress play a role in this?
Doesn’t sound like it. The Times article points out this is “a new federal rule” . Not a law. A rule can be challenged legally.
“The Times”. Well, there you go: it’s likely Unconstitutional no matter how they ‘title’ it.
Whatever “The Times” says, reverse it and you’ll have the truth.
The Washington Times.
Somehow this is the worst thing I have read over the last 10 years. Faithfully paying every bill promptly over a lifetime, prudently saving enough money to put down a sizable down payment, and otherwise being of good character, now gets one significantly penalized. It’s over! I hate this country!
Nah, replace ‘country’ with Democrat Party and you have it all neatly packaged.
And the spineless Republicans who sit there like sniveling castrati doing nothing.
Until it goes into effect it can’t be challenged legally b/c there’s no one who has been harmed. No plaintiffs = no case. Even then a multi year process with little hope of an injuction to block it taking effect.
The HoR could invoke the Administrative Review Act to knock this down but the d/prog in the Senate majority are unlikely to go along so that’s probably on hold until after the next Congress is seated.
The HoR might insert a block to the debt ceiling legislation but they are already loading it up and lots of those items will be compromised away in order to get something passed so the govt doesn’t default on debt payments and all the other things we spend money on. Given the current waves being made by coalitions of other Nations setting up payment settlements outside dollar denominated transactions it may not be the best time to have an interruption to US Govt payments.
They. Are. Part. Of. The. Scam.
There’s a reason a treasous rat named McConnell leads the GOP in the senate, and a compliant, incompetent boob named Rona Romney McDaniels is the Chairwoman of the GOP.
https://actionnetwork.org/petitions/stop-mitch-mcconnell-elaine-chaos-corruption
It’s a sham two-party system. All theatrics
California makes their Marxist/Commie move, so now The Hologram’s Handlers make theirs – upping the ante even further as typical.
This is blatant welfare by the backdoor for the irresponsible among the General Public…the entitled who won’t do the real work to pay for their own lives yet likely have the latest iPhone and/or an EV – both “subsidized” (aka ‘paid for in part’) by actual taxpayers.
Government Thieves are getting more insidiously creative in their theft of private monies.
Secession is our only way out of this.
Community reinvestment act 2.0. Short memories don’t remember 08.
That assumes they want to avoid a repeat of ’08. I would argue they’re doing everything they can to collapse the system, because that’s the easiest way to replace the system.
This is another form of wealth transfer tax. When they are coming for you at so many angles, it’s hard to fight.
You noticed that?
It is indeed a wealth transfer, but the folks with poor credit are merely a pass-through, and they will retain virtually none of it.
The wealth of the prudent is meant to end up in the hands of the rule-makers.
This is going to start separating rich from poor. People with generational wealth will stop using mortgages. Among other good habits that go with generational wealth (ie Dave Ramsey legacy journey) you don’t have to get in bed with lenders or abide by conforming loans.
Rich get richer and the poor stay poor.
Yes pay cash when ever possible, you don’t need new cars, buy certified and with cash
Houses keep going up, that’s harder but stop going out to eat or when you do pay cash.
Do you really need 40 pairs of shoes?
Closets have gotten so big because people buy insane amounts of clothes they hardly even wear.
Remember the size of clothes closets growing up?
It’s amazing where you can save money
And if you use a Credit Card, pay it off at the end of the month
I just called McCarthys office, my congressman Carter and Senator Cruz to tell them to get off their Butts and stop this insanity
I didn’t bother with Cornyn, his people are as disinterested as he is.
Please call, hound them, it’s the only way they will do anything
Good advice!
They are far from disinterested. Would it be so.
Dave Ramsey is my hero. I’m to the point where I don’t care what my credit score is. If I can’t pay it off right away, I don’t buy it. House paid off, student loans paid off, credit cards paid off. It *hurt* to get here, but that pain is temporary. Now all I really worry about is the current administration looking at my hard-won savings with greedy fingers reaching out to grab. They already nuked the top fifteen to twenty percent off with their inflation.
Dave Ramsey is a good source of info for the poor or anyone trying to get ahead of where they are now.
He’s good advise for anyone
I used to listen to him while I was driving the kids to and from town. I hoped but never thought my kids were listening (they all had books to read). One day my oldest said to me “Yeah, mom, Dave Ramsey already taught me that.”
I guess it sunk in over time. After that I didn’t worry too much about his finances once he moved out.
yes, he has done some stupid things, but he is only 21, and already seen the errors of his ways and working 2-3 jobs to get out of his car debt.
He is a smart young man.
A house is a big ticket item, but you are still seeing some who pay cash for that starter house.
For convenience and to avoid some tax hits of moving money around, I looked at getting a bridge loan in my recent purchase and it just wasn’t worth it. A “hybrid” job classification was insufficient, it had to be virtual to purchase outside the area of where my employer was. Then there’s all the surprise garbage they throw at you along the way.
Setting my own kid up to NEVER need a mortgage. They freaking own you, not the other way around.
If the article is correct, notice how this applies to just Americans. Some non American can come in find a way to establish credit and go through the mortgage process and not be affected.
Will this apply somehow to the Blackrock’s of the world who can go out and leverage borrowing to buy up numerous mortgages at once and bundle them or even the someone buying up a multi unit property and become a landlord.
“Do we learn nothing from history?”
Of course we do.
DESTROY THE BOURGEOISIE.
Is there any legal authority to enact this at all?
If so, WHY? The government should have no say in this!
If not, who has standing to sue?
Subsidizing green energy has driven up the average price of new cars to almost $50K resulting in fewer people being able to afford new cars. The goal is not to save the environment but to deny us freedom of travel by restricting the private property ownership of automobiles.
Subsidizing mortgages is working towards the same goal: restrict the ownership of private property by making houses more expensive and placing ownership in a few hands who are under the control of government.
There is a reason why people live in shoebox apartments in China and it’s not because they choose to. It’s the only roof available.
Phew!
Good thing I don’t have good credit!
The federally backed home mortgage companies
Of course, there is the heart of the problem….
I prefer my subsidies and wealth-transfer more overt, so I can brag about it. Take it into the general fund, via a “progressive” income tax — dish out on poverty or min income scale, reparations, security, saving Gaia, or whatever, if that’s your thing.
When you target actual wealth and wealth creation, you kill the goose that funds the subsidy n transfer game. Which leaves us with the question: Do they know this is what they’re doing, or are they cluelessly destructive? I, myself believe that like other electoral politics, it’s a coalition. The intentionally destructive, clueless righteous, and opportunistic grifters mutually baiting each other. Each group thinks they’re gonna win, and the others are suckers.
Thing is they’re all gonna lose, and clip the rest of us along the way. Sad.
This is such contemptible BS from the vile Dumb-o-crats. These bastards are always taking money from responsible and hard-working citizens, while rewarding the indolent, shiftless, entitled and parasitic leeches and ingrates who comprise so much of their base.
This is (on one surface) exactly the same as the “everyone should go to college” racket. It’s a good thing, therefore Progressives believe everyone should be able to have/obtain it. And they absolutely ruined college with it (apart from the woke stuff) – it become of almost no value, except as class signaling.
So, since “the American Dream is to own a house” therefore everyone must own a house or we have utterly failed as a nation and we should all burn in progressive he**. So, we will devalue the ownership of homes, too, and all the hard work associated with reaching that marker.
Democrats appear to think that home ownership creates financial discipline and success, rather than being the reward for them. That’s why they believe the stupid idea that helping somebody buy a house when they have neither the financial wherewithal to weather a storm (mortgage payments, property taxes, and maintenance do not wait for you to get another job) nor the discipline pay bills in full and on time will magically solve both problems.
Portland either did or tried to do something like this with a 0.5% charge on the cost of a new house to give money to those who didn’t have any to buy a house. in states with caps on home value tax increases they want you to buy and sell houses a lot in order to keep raising the basis with a sale. I had neighbors on my street who were paying 1/3 the real estate taxes on a comparable home because they had been in it for 30 years.
That is particularly acute in California. Florida has a cap too on “homestead” property, but it’s 10% annually, which in normal property markets is no cap at all. Your property taxes can keep going up at that pace in Florida even when property values are falling, because your assessed value has lagged behind.
The cap on homesteaded property in Florida is 3% a year or the CPI index increase, the lessor of the two numbers applies. The benefit is portable if you buy a different homesteaded property.. I own a small condo in Florida and am sitting on nearly $100k in portability at the end of 2022.
You are correct that if you the property value goes down but I am under the cap you could see your taxes rise. There are also things like the non add valorem items on your tax bill are exempt from the savings.
https://floridarevenue.com/property/Documents/pt112.pdf
Democrats can’t learn from events. When something emotionally unsatisfying happens, they deny it, make up a story they like better, and decide to believe the story instead.
This article from January may help explain things
https://www.mortgagenewsdaily.com/news/01192023-big-llpa-changes
There is no fricking way this is actually legal.
This program has been around since about 2008. It ties back to a law passed in response to all the bad real estate loans that failed in that period. The power comes from
“Section 1601 of the Housing and Economic Recovery Act of 2008 (HERA)
requires the Federal Housing Finance Agency (FHFA) to conduct an ongoing study of the
guarantee fees charged by Fannie Mae and Freddie Mac and to submit annual reports to
Congress, based on aggregated data collected from the Enterprises, regarding the amount
of such fees and the criteria used by the Enterprises to determine them. ”
https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/20100708_GFeeReport_2008-2009_508.pdf
I have question the fact the government is forecasting a bunch of loan defaults on the near future and raising rates on those more able to pay and with a lower loan to value ratio is the best way to fund the accounts to pay for probable upcoming loan defaults.
So what’s going to happen is that housing prices are going to be artifiical, and there will be zillions of defaults in mortgge payments by bad-credit clowns who couldn’t manage financing a piece of furniture, let alone a house.
Nothing new here. Rick Santelli’s rant heard round the world is timeless. This is old, Biden has never had an idea of his own, good or bad. This is an Obama/Democrat fav. Watch it. Enjoy
https://duckduckgo.com/?q=rick+santoli+rant&atb=v274-1&iax=videos&ia=videos&iai=https%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3DbEZB4taSEoA