Mortgage borrowers with good credit may face higher costs under a new scheme from federal mortgage associations Fannie Mae and Freddie Mac.The firms have released a new Loan–Level Price Adjustment (LLPA) Matrix for loans sold to them after May 1, 2023. Under the new matrix, borrowers with high credit scores will face higher mortgage fees than before and those with lower credit scores will face lower fees.
"It's unprecedented," David Stevens, a former federal housingcommissioner and former CEO of the Mortgage Bankers Association, told the New York Post. "My email is full from mortgage companies and CEOs [telling] me how unbelievably shocked they are by this move."
The fee increase is unlikely to lead to significantly higher monthly mortgage payments for most borrowers. For instance, someone with a $400,000 loan and a 6 percent mortgage rate may wind up paying about $40 more per month, according to Stevens' calculations.
But an extra $40 per month means an extra $480 per year. And over the whole course of mortgage repayment, a homeowner could wind up paying thousands of dollars more due to the fee shift.
Regardless of what the shift means in terms of actual costs, it seems unfair that borrowers with extremely good credit are effectively being penalized while borrowers with lower credit scores are being rewarded.
"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," Stevens said.
"Overall, lower-credit buyers will still pay more in LLPA fees than high-credit buyers – but the latest changes will close the gap," notes the Post:
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….
LLPAs are upfront fees based on factors such as a borrower's credit score and the size of their down payment. The fees are typically converted into percentage points that alter the buyer's mortgage rate.
Under the revised LLPA pricing structure, a home buyer with a 740 FICO credit score and a 15% to 20% down payment will face a 1% surcharge – an increase of 0.750% compared to the old fee of just 0.250%….
Meanwhile, buyers with credit scores of 679 or lower will have their fees slashed, resulting in more favorable mortgage rates. For example, a buyer with a 620 FICO credit score with a down payment of 5% or less gets a 1.75% fee discount – a decrease from the old fee rate of 3.50% for that bracket.
Mortgage News Daily explained it this way in January when the changes were announced:
The effective penalty for having a credit score under 680 is now smaller than it was. It still costs more to have a lower score. For instance, if you have a score of 659 and are borrowing 75% of the home's value, you'll pay a fee equal to 1.5% of the loan balance whereas you'd pay no fee if you had a 780+ credit score. But before these changes, you would have paid a whopping 2.75% fee. On a hypothetical $300k loan, that's a difference of $3750 in closing costs.
Elsewhere in the spectrum, things got worse. Borrowers with higher credit scores will generally be paying a bit more than they were under the previous structure.…This doesn't necessarily come out of your pocket upfront as lenders can offer higher interest rates in some cases and pay these costs for you (but the costs are still there, and still technically being paid by you over time in the form of higher interest rates).
Federal Housing Finance Agency Director Sandra L. Thompson called it "another step to ensure that [Fannie Mae and Freddie Mac] advance their mission of facilitating equitable and sustainable access to homeownership."
FREE MINDS
Buzzfeed News is shutting down. Former Editor in Chief Ben Smith (now editor in chief of Semafor) explores what went wrong—a story that mirrors larger shifts in the internet-media ecosystem and the evolution of social media platforms and public opinion about them.
"The end of BuzzFeed News also signals a vast shift in digital media that those of us who live inside it are feeling intensely right now, the end of one era and the beginning of another," wrote Smith:
[Buzzfeed co-founder Jonah] Peretti had built BuzzFeed into a traffic juggernaut by being among the first to see the rising social web. But BuzzFeed never found a new path when that trend turned against us — when consumers found their Facebook feeds toxic, not delightful; when platforms decided news was poison; and when Facebook, Twitter, and the rest simply stopped distributing links to websites.
Peretti created BuzzFeed in 2006 while he was working at Huffington Post, as it was then called, which he co-founded. In 2020, BuzzFeed — shaky but still apparently ascendant —acquired HuffPost off the hands of its latest owner, Verizon. (As I recall, they basically paid BuzzFeed to take it off their hands.)
But as the social tide receded, HuffPost's giant, old-fashioned front-page, has remained surprisingly vital. In its first iteration as a liberal answer to the Drudge Report, it had hooked a generation of baby boomers in the mid-aughts with a mix of giddy coverage of Barack Obama and salacious celebrity gossip. Drudge and Huffington Post, the old portals that propped up the internet of the mid-aughts, will outlive the social media age, along with, of all things, Yahoo!.
FREE MARKETS
A new report from the R Street Institute shows alcohol delivery is not correlated to higher rates of alcohol consumption. The report is based on recent data from the National Institute on Alcohol Abuse and Alcoholism (NIAAA) Surveillance Report, which R Street compared to state alcohol delivery rules.
"News stories during the pandemic suggested that liberalizing alcohol delivery laws was causing Americans to drink more," notes C. Jarrett Dieterle, a resident senior fellow at the R Street Institute and the author of Give Me Liberty and Give Me a Drink!
As one Washington Post headline from December 2021 put it: "States rushed to loosen alcohol laws in the pandemic. Heavy drinking went up, some studies say."
The problem is that these "studies" said no such thing. It was clear that more states were allowing alcohol delivery. And there was also evidence showing that Americans were drinking more during COVID-19. But there were no studies showing a connection between these two things. In fact, numerous researchers suggested that "social stressors" like loneliness and greater demands during the pandemic were the likeliest causes of increased consumption.
More here.
QUICK HITS
More good news out of TN today: the legislature unanimously passed a bill requiring TDOC to equip people leaving prison with a state ID, certified copy of their birth certificate & social security card. Thank you @RepAndrewFarmer & Sen. @ToddGardenhire! pic.twitter.com/7YpdVRKO3E
— Lauren Krisai (@laurenkrisai) April 21, 2023
• Starship, the uncrewed rocket launched by SpaceX yesterday, exploded midair.
• Stacey Plaskett, a Democratic delegate to Congress from the U.S. Virgin Islands, is accusing writer Matt Taibbi of perjury. "The congresswoman's basis for accusing Taibbi of perjury is a handful of errors that he made during the publication of the Twitter Files," notes Reason's Robby Soave. But while "it is true that Taibbi made some errors…it is obviously not the case that Taibbi committed perjury."
• PEN America's latest banned books report is out. "During the first half of the 2022-23 school year PEN America's Index of School Book Bans lists 1,477 instances of individual books banned, affecting 874 unique titles," the organization says.
• From The Free Press: "Having a baby made me even more pro-choice."
• A bill in Alabama (H.B. 229) "would create a review process for the possible resentencing or release" of incarcerated people age 50 and up who have already served at least 15 years in prison and were not in for "a crime that involved serious physical injury to a victim," notes the Alabama Political Reporter.
• "The populist right stumbles into boilerplate progressivism — again," laments Noah Rothman at National Review.
• Utah is making it easier for out-of-state and foreign workers to get licensed to work in the state.
• "Kansas' governor vetoed legislation Wednesday that would require clinics to tell patients that a medication abortion can be stopped using an unproven drug regimen," reports the Associated Press.
FAQs
What is bidens new mortgage rules? ›
On May 1st, at the direction of President Biden, the Federal Housing Finance Agency (FHFA) implemented new rules that will increase mortgage payments for homeowners with higher credit scores and redistribute those funds to individuals with low credit scores.
Does my credit score affect my closing cost? ›Lenders say those with higher credit scores and more savings will usually put more money down on a house, like 20%. With this fee adjustment, they'll see an increase in fees typically on closing costs.
What is the new Biden rule for May 1? ›Under new rules from the Federal Housing Finance Agency (FHFA) set to take effect May 1, borrowers with lower credit ratings and less money for a down payment will qualify for better mortgage rates than they otherwise would have, while those with higher ratings will pay increased fees.
Does the new mortgage fee affect conventional loans? ›The new fees will affect conventional loans that conform to the standards set by Fannie Mae and Freddie Mac, which guarantee about half of all U.S. mortgages. The fees will be different depending on the borrower and will be based on their credit scores, downpayments, and other factors.
What is going to happen to Canadian mortgage 2023? ›Starting in 2023 or 2024, we expect prices and sales to rise again and forecast inflation to hit its 2% target by the end of 2025. Mortgage rates are expected to become more affordable after 2023. These changes, along with renewed growth in income and employment will support housing demand and supply.
What is the 43 mortgage rule? ›As a general guideline, 43% is the highest DTI ratio a borrower can have and still get qualified for a mortgage. Ideally, lenders prefer a debt-to-income ratio lower than 36%, with no more than 28% of that debt going towards servicing a mortgage or rent payment. 2 The maximum DTI ratio varies from lender to lender.
Can I get a lower mortgage rate with high credit score? ›A higher score increases a lender's confidence that you will make payments on time and may help you qualify for lower mortgage interest rates and fees.
What is the new credit score rule for FHFA? ›On October 24, 2022, FHFA announced the validation and approval of two new credit score models, FICO 10T and VantageScore 4.0, for use by the Enterprises. Once implemented, lenders will be required to deliver both FICO 10T and VantageScore 4.0 credit scores, when available, with each loan sold to the Enterprises.
What is the highest credit score? ›The base FICO® Scores range from 300 to 850, and a good credit score is between 670 and 739 within that range.
What is bidens immigration policy? ›Expand Border Patrol capacity for holding migrants and increase Immigration and Customs Enforcement removal flights, doubling and tripling some for certain countries. Open processing centers in countries where people can apply for legal immigration to the U.S., Canada, Spain and other countries.
What is a good credit score for a mortgage loan? ›
It's recommended you have a credit score of 620 or higher when you apply for a conventional loan. If your score is below 620, lenders either won't be able to approve your loan or may be required to offer you a higher interest rate, which can result in higher monthly payments.
Why did my mortgage go up if I have a fixed rate? ›A fixed rate means the principal and interest payment on your loan will never change. However, your monthly mortgage payment also includes an escrow payment for real estate taxes and insurance premiums, which do change periodically.
What is the Biden mortgage fee? ›The changes are part of a Biden Administration rule intended to provide equitable access to homeownership. First-time homebuyers with high credit scores would pay more under this new rule. Before May 1, if you have a credit score of 740 or higher, on a $500,000 loan, you would pay a fee of 0.25%, which is $1,250.
Will mortgage rates go down in 2023 2024? ›Fannie Mae expects the 30-year fixed to ease to around 6.1% in the second quarter of 2023, before falling to 5.9% in the third quarter and 5.7% in Q4. And it gets even better than that. By the end of 2024, they expect the 30-year fixed to average 5.2%.
Are mortgage rates expected to drop in 2024? ›Fannie Mae, Mortgage Bankers Association and National Association of Realtors expect mortgage rates to drop through the first quarter of 2024, by half a percentage point to about nine-tenths of a percentage point. Figures are the predicted quarterly average rates for the 30-year fixed-rate mortgage.
What will interest rates be in 2023 2024 Canada? ›A median of responses expects the Bank of Canada to maintain its policy rate at 4.50% for the remainder of 2023 before it begins to cut rates in 2024. Most expect rates to fall to 3.50% by the second quarter, and continue to fall to 3.00% by year-end.
What is the 80% mortgage rule? ›Even if you don't have a 20% down payment, you can avoid the cost of private mortgage insurance (PMI) with an 80-10-10 loan. You take out a primary mortgage for 80% of the purchase price and a second mortgage for another 10%, while making a 10% down payment.
What is the golden rule on a mortgage? ›The 28/36 rule states that your total housing costs should not exceed 28% of your gross monthly income and your total debt payments should not exceed 36%. Following this rule aims to keep borrowers from overextending themselves for housing and other costs.
What is the 80 20 rule in mortgages? ›An 80/20 loan was a type of piggyback loan, which is a home loan that's split into two parts. It's called an 80/20 loan because the first part is a mortgage that covers 80% of the home purchase price. The second part is either a home equity loan or a home equity line of credit that covers the remaining 20%.
How much can you borrow with a 700 credit score? ›The average credit limit for those with a 700 credit score is right around $4,500. However, if you were to pull out a 700 credit score personal loan, you should be able to access more money than you would with just a credit card.
What interest rate can I get with a 750 credit score? ›
| FICO Score | National average mortgage APR |
|---|---|
| 660 to 679 | 6.806% |
| 680 to 699 | 6.592% |
| 700 to 759 | 6.415% |
| 760 to 850 | 6.193% |
| FICO Score | APR* | Monthly Payment |
|---|---|---|
| 760-850 | 5.868% | $1,773 |
| 700-759 | 6.090% | $1,816 |
| 680-699 | 6.267% | $1,850 |
| 660-679 | 6.481% | $1,892 |
With the 35% / 45% model, your total monthly debt, including your mortgage payment, shouldn't be more than 35% of your pre-tax income, or 45% more than your after-tax income. To calculate how much you can afford with this model, determine your gross income before taxes and multiply it by 35%.
What is the fhfa cfi limit? ›SUMMARY: The Federal Housing Finance Agency (FHFA) has adjusted the cap on average total assets that is used in determining whether a Federal Home Loan Bank (Bank) member qualifies as a “community financial institution" (CFI) to $1,323,000,000, based on the annual percentage increase in the Consumer Price Index for ...
What is the debt-to-income ratio for FHFA? ›Share: In January, the Federal Housing Finance Agency (FHFA) announced a new fee for borrowers with debt-to-income (DTI) ratios at or greater than 40 percent on loans acquired by Fannie Mae and Freddie Mac. The housing industry strongly opposed this DTI ratio-based fee.
Do people actually have a 900 credit score? ›What percentage of the population has a credit score over 900? Only about 1% of people have a credit score of 850. A 900 credit score can be thought of as fairly unrealistic.
Has anyone got 900 credit score? ›Depending on the type of scoring model, a 900 credit score is possible. While the most common FICO and VantageScore models only go up to 850, the FICO Auto Score and FICO Bankcard Score models range from 250 to 900.
Does 900 credit score exist? ›FICO® score ranges vary — they can range from 300 to 850 or 250 to 900, depending on the scoring model — but higher scores can indicate that you may be less risky to lenders.
What is the new immigration bill 2023? ›Sánchez will introduce the U.S. Citizenship Act of 2023, a humane, common-sense, and long-overdue approach to solving our immigration challenges. This legislation, sent to Congress by President Joe Biden in 2021, restores humanity and American values to our immigration system.
What is Title 42 policy? ›Under Title 42, migrants were returned over the border and denied the right to seek asylum. U.S. officials turned away migrants more than 2.8 million times. Families and children traveling alone were exempt. But there were no real consequences when someone illegally crossed the border.
What credit score is needed for a 300k house? ›
Additionally, you'll need to maintain an “acceptable” credit history. Some mortgage lenders are happy with a credit score of 580, but many prefer 620-660 or higher.
What interest rate can I get with a 760 credit score? ›You can borrow over $100,000 with an 800 credit score if you get a mortgage or a home equity loan. Keep in mind, the exact amount of money you will get depends on other factors in addition to your credit score, such as your income, your employment status and even the lender.
Why did my mortgage go up 400 a month? ›The answer to why your payment changed may simply be that your lender has added new fees to your monthly bill, increasing your payment. It's usually possible to avoid such servicing fees. To find out, check your monthly mortgage statement to see if any new items were added.
Why are fixed rate mortgages bad? ›Cons. Fixed rates can be higher than the best variable rates. You are stuck on a fixed rate if other mortgage rates go down when interest rates fall. If you switch to another rate before your deal ends, you'd normally have to pay an early repayment charge.
Is it worth coming out of a fixed-rate mortgage? ›If you're only planning on staying in your property for a few years, there's no point in taking out a 10-year fixed-rate mortgage. This is for two reasons: You'll have to pay high fees for leaving early, known as the early repayment charge. Usually, longer fixed periods come with higher rates than shorter ones.
How can I get a low mortgage rate? ›- Shop around. When looking for mortgages, be sure to contact several different lenders. ...
- Improve your credit score. ...
- Choose your loan term carefully. ...
- Make a larger down payment. ...
- Buy mortgage points. ...
- Rate locks. ...
- Refinance your mortgage.
Exit/Closure fee. This is a fee to your lender when you repay your mortgage, even if you are not repaying it early. If you've already paid the mortgage account fee then it's unlikely you'll need to pay this particular fee as it will usually include set up and maintenance, as well as the closure of the account.
What is the mortgage rate for May 1 2023? ›Today's National Mortgage Rate Averages
The 30-year mortgage average shed 6 basis points Friday, ending the week at 6.89%.
The ATR/QM Rule requires institutions, individuals and groups to make a “reasonable and good faith determination” concerning a consumer's ability to repay a loan according to its terms. This must happen before the lender creates a residential mortgage.
What is the new general qualified mortgage rule? ›
Under the amended rule, a loan will meet the General QM definition if the annual percentage rate (APR) exceeds the average prime offer rate (APOR) for a comparable transaction by less than 2.25% (or up to 6.5% depending on the loan amount and transaction type) at the time the interest rate is set.
What is a new mortgage clause? ›A mortgagee clause is found in many property insurance policies and provides protection for a mortgage lender if a property is damaged. While lenders do receive protections with the mortgagee clause, borrowers benefit as well from reimbursements for repairs to the home as well as any documented lost property.
What is the 2 rule for mortgage payment? ›The 2% rule states that you should aim for a 2% lower interest rate in order to ensure that the savings generated by your new loan will offset the cost refinancing, provided you've lived in your home for two years and plan to stay for at least two more.
What is the 45 rule for mortgage? ›The 35%/45% rule emphasizes that the borrower's total monthly debt shouldn't exceed more than 35% of their pretax income and also shouldn't exceed more than 45% of their post-tax income. To use the first part this rule, you'll need to determine your gross monthly income before taxes and multiply it by 0.35.
What is the 27% mortgage rule? ›A household should spend a maximum of 28% of its gross monthly income on total housing expenses according to this rule, and no more than 36% on total debt service. This includes housing and other debt such as car loans and credit cards. Lenders often use this rule to assess whether to extend credit to borrowers.
What is the 3% QM rule? ›A loan qualifies as a General QM as defined in the ATR/QM Rule if: it does not have negative amortization, interest-only or balloon payment features, a term that exceeds 30 years, or total points and fees that generally exceed 3 percent of the loan amount (General QM Product Requirements)
What is the 20 mortgage rule? ›Typically, mortgage lenders want you to put 20 percent down on a home purchase because it lowers their lending risk. It's also a rule that most programs charge mortgage insurance if you put less than 20 percent down (though some loans avoid this).
What are the 4 types of qualified mortgages? ›There are four types of QMs – General, Temporary, Small Creditor, and Balloon-Payment.
What is the new qualifying rate in Canada? ›The mortgage qualifying rate is your contract interest rate plus a buffer of 2%, or a minimum of 5.25%.
What is the difference between remortgage and new mortgage? ›A remortgage is basically a mortgage that you use to pay off a mortgage that you already have. The remortgage is a new mortgage on the same property as your current mortgage, the paying off of which leaves you with the new mortgage instead.
What is the Isaoa clause? ›
ISAOA is an acronym found in mortgagee clauses that stands for “its successors and/or assigns.” It's included in the clause to stipulate that the mortgagee can transfer their rights to another bank or financial institution.
What is rocket mortgage clause? ›The Bottom Line: A Mortgagee Clause Protects Your Property
If your property is damaged while you're paying off your mortgage, your insurance company will pay for the loss. As a mortgagor, you'll need to purchase a homeowners insurance policy as it's a lender requirement and is part of getting a mortgage.
Maximum Monthly Debt Payment — The 40% Rule
Lenders review your financial status and usually do not grant a loan when all of your outstanding financial obligations exceed 40% of your monthly income. Before applying for the home loan, do some calculations to determine if you even qualify for the loan.
The 50% rule is a guideline used by real estate investors to estimate the profitability of a given rental unit. As the name suggests, the rule involves subtracting 50 percent of a property's monthly rental income when calculating its potential profits.
How much house can I afford if I make $70,000 a year? ›If you're an aspiring homeowner, you may be asking yourself, “I make $70,000 a year: how much house can I afford?” If you make $70K a year, you can likely afford a home between $290,000 and $360,000*. That's a monthly house payment between $2,000 and $2,500 a month, depending on your personal finances.