Interest Rate and Credit Score

[Mle8308]

The FEES that this will change has nothing to do with the interest rate.

The FEES that this will change has nothing to do with the interest rate.

Gotcha! I'm no mortgage expert! It is still an added increase for some, depending on where they get the mortgage. Still, doesn't necessarily help low income people.

 

[Pea-n-Me]

But an extra <0.5% on your loan is large? And isn't it practically offset by the interest deduction? You're willing to pay an extra 3+% every time you use your CC, but the extra 0.5% mortgage fee is too much? Which one do you think costs you more money over a year?

I think the issue, Sam, for many, is that this isn’t a choice. It’s not really even the amount, either. It’s that the government forcing people who played by the rules to pay more for people who didn’t. That’s what people are upset about.

 

[sam_gordon]

I think the issue, Sam, for many, is that this isn’t a choice. It’s not really even the amount, either. It’s that the government forcing people who played by the rules to pay more for people who didn’t. That’s what people are upset about.

Childless couples pay for schools.
People without cars pay for roads.
I'm sure there are other examples. People are "forced" to pay for others all of the time. The natural argument to that is schools and roads are better for society. But isn't housing for more better for society? More people is houses means empty apartments, empty apartments means more people can get houses, yes?

Now, I don't like paying more than I need to. I just don't think this is a "break out the pitchforks" issue. AND, based on other reading, I don't think the person(s) people are "blaming" for this fee are actually the one(s) responsible.

 

[Ms.Minnie]

Frankly, it is just a mental hold-over from the days when my husband was in business for himself and our income was so wildly variable from month to month or season to season that I didn't feel comfortable doing that. I probably should work on changing my attitudes toward credit - lord knows a decent travel points card would be an asset at this point in our lives - but some habits/insecurities just linger, you know?



Exactly. I'm not saying anyone should feel bad about their privilege, but it is worth being conscious of the fact that not everyone has access to those advantages when we're talking about how to make systems work on a society-wide scale.

I understand what you're saying about being self-employed. Been there done that. My DH and I bought a business many years ago, the biggest financial mistake we have made to date (hopefully there will be no more). Luckly, prior to doing that my DH had earned a substantial amount of money via a partnership agreement he had with his previous employer (prior to us buying the business). I will say that luckily, we put that big payout in the bank, we didn't spend it and we were able to meet all our financial obligations (personal & business related) without missing a payment. We were able to maintain our good credit standing while making very little money.

But an extra <0.5% on your loan is large? And isn't it practically offset by the interest deduction? You're willing to pay an extra 3+% every time you use your CC, but the extra 0.5% mortgage fee is too much? Which one do you think costs you more money over a year?

I think you left off part of my comment.

"I just hope that ALL merchants don't decide to do this, if they do, I may have to start carrying cash which I don't want to do."

You see that I said if they all start to do this, I may have to start carrying cash = paying cash instead of using credit cards. I have a choice in this scenario.

Also, the two times I encountered the charge we were at small family-owned restaurants. This is a survival tactic on their part to offset the increase in all their expenses caused by inflation.

 

[Pea-n-Me]

Childless couples pay for schools.
People without cars pay for roads.
I'm sure there are other examples. People are "forced" to pay for others all of the time. The natural argument to that is schools and roads are better for society. But isn't housing for more better for society? More people is houses means empty apartments, empty apartments means more people can get houses, yes?

Now, I don't like paying more than I need to. I just don't think this is a "break out the pitchforks" issue. AND, based on other reading, I don't think the person(s) people are "blaming" for this fee are actually the one(s) responsible.

Of course - roads, schools, services, these are things we all have to pay for, and we know it.

Slipping something like this in, seemingly overnight, with wonky wording that few can figure out, only serves to inflame the issue.

 

[Ms.Minnie]

Childless couples pay for schools.
People without cars pay for roads.
I'm sure there are other examples. People are "forced" to pay for others all of the time. The natural argument to that is schools and roads are better for society. But isn't housing for more better for society? More people is houses means empty apartments, empty apartments means more people can get houses, yes?

Now, I don't like paying more than I need to. I just don't think this is a "break out the pitchforks" issue. AND, based on other reading, I don't think the person(s) people are "blaming" for this fee are actually the one(s) responsible.

Sorry but this just seems silly to me.

Yes, we all pay to educate children, someone other than your parents helped to pay for your education. It's for the greater good. Although we could argue that maybe the tax dollars used for education should follow the child rather than going to the public school in the taxing district but that is a discussion for another time and probably not allowed.

We all benefit from the roads even if you don't drive or own a car. Without the roads we wouldn't have anything in our grocery stores. There are so many other reasons why we all need roads that I'm not even going to try to list them.

The problem with this change is we don't seem to know what it really is. Is this some type of PMI as has been alluded to somewhere in this tread? I read some of the posted articles and it's not clearly stated what it is, what it's for and is it one time or over the course of the loan. These questions should be clearly answered, it shouldn't be the difficult to clearly state what this all means.

 

[sam_gordon]

Of course - roads, schools, services, these are things we all have to pay for, and we know it.

Slipping something like this in, seemingly overnight, with wonky wording that few can figure out, only serves to inflame the issue.

I'm not sure when they decided to do this (not talking about the effective date), so was the information out there and media grabbed onto it late?

I agree people not doing the research and just talking talking points from whatever source is not helping. That's why I've posted a couple times in this thread asking if I understood correctly. Not one person has said I don't. So either they don't know or I'm right, that this COULD be a slight increase to the FEE paid for the mortgage.

Not speaking for others, but when I shop for a mortgage, I know how much I need to cover, then I find out what the lender is going to charge me. I'm not worried about every line item of fees, I want the total. I figure the fees are a fixed cost. Based on what I've read, this increase is basically going to be so small, I wouldn't even notice it. Others have claimed this will add over $10,000 to the cost of the mortgage ($40/month * 360 months). Of course, that's going to have people up in arms. I would be upset too. But that doesn't seem to be the case.

 

[Pea-n-Me]

I'm not sure when they decided to do this (not talking about the effective date), so was the information out there and media grabbed onto it late?

When I was looking at articles a few days ago I only saw them going back a couple of months.

The group of state auditors seemed surprised.

Not speaking for others, but when I shop for a mortgage, I know how much I need to cover, then I find out what the lender is going to charge me. I'm not worried about every line item of fees, I want the total. I figure the fees are a fixed cost. Based on what I've read, this increase is basically going to be so small, I wouldn't even notice it. Others have claimed this will add over $10,000 to the cost of the mortgage ($40/month * 360 months). Of course, that's going to have people up in arms. I would be upset too. But that doesn't seem to be the case.

I thinK people just don’t know, that’s why there weren’t a lot of replies. And some replies were based on what’s being reported. That’s all we know right now. I’m sure more will come out as we get more into the nitty gritty of it.

I just remember the multiple times I’ve sat signing papers for mortgages or refinances that go over every.little.detail. of what we’re paying for as a result of years of transparency work. This seems to have slipped right in whether people wanted it or not.

 

[sam_gordon]

When I was looking at articles a few days ago I only saw them going back a couple of months.

So how long of notice should there have been?

The group of state auditors seemed surprised.

I thinK people just don’t know, that’s why there weren’t a lot of replies. And some replies were based on what’s being reported. That’s all we know right now. I’m sure more will come out as we get more into the nitty gritty of it.

Agreed.

I just remember the multiple times I’ve sat signing papers for mortgages or refinances that go over every.little.detail. of what we’re paying for as a result of years of transparency work. This seems to have slipped right in whether people wanted it or not.

I don't remember getting ANY vote on what fees were charged on my loans. I had to pay them regardless of whether I wanted them or not. So why should this be different?

 

[Pea-n-Me]

So how long of notice should there have been?

Agreed.

I don't remember getting ANY vote on what fees were charged on my loans. I had to pay them regardless of whether I wanted them or not. So why should this be different?

Because, for one thing, it’s controversial, and was bound to create conflict due to the nature of its premise. Perhaps if it was just this one thing it wouldn’t have been so noticeable. But in looking at the big picture, it’s just one more thing that people have to be “angry” about. Had it been discussed, however, it likely would’ve stalled, so that’s why it went forward regardless. But we’re on a slippery slope. Yesterday it was school loans, today it’s this, what will it be tomorrow? I’m at the end of my mortgage-paying days, thankfully, but this does concern me for my kids, who’ve worked hard to do the right things, and are going to have trouble managing the cost of homes today as it is. They will now have to pay even more than before, which was already a lot. We can go back and forth with the “fairness” aspect till the cows come home, but at some point, people aren’t going to want to keep paying more and more because they’ve worked hard, unless I’m wrong and people really do want to do that for the ”better good”. But even you yourself have admitted this has the potential to irk you a little bit, I guess depending on amounts? I just see it a different way.

 

[Cannot_Wait_4Disney]

I think the issue, Sam, for many, is that this isn’t a choice. It’s not really even the amount, either. It’s that the government forcing people who played by the rules to pay more for people who didn’t. That’s what people are upset about.

Well then they're upset about something that isn't even true.

1. Nobody is being forced to pay anything. Is anyone putting a gun to anyone's head and saying they must not only buy a house and must get a mortgage but must get a conforming mortgage? If you don't like it, get a non conforming mortgage product or qualify for a mortgage that doesn't have them. If your score is 780, you'll only need 25% down to avoid it. If your score is 760, you only need 30% down. If your score is 640 you'll need 40% down. Again nobody is forcing anyone to do anything. Nobody is putting a gun to anyone's head.

2. Just because someone has a credit score in the 660 range vs 760 range doesn't mean the person in the 660 range did not play by the rules. It may mean they don't have enough of a credit record at all. It may mean they've had some late payments. There is a minimum score requirement for a conforming loan which is in the "fair" range.

3. Nobody is paying more so someone else can pay less. The fact remains that those with lower credit scores are still paying more than those with better ones on average. And the lower your credit score is, the more you'll have to put down to avoid the fee entirely. It's all about risk.

4. There has been much complaining about 80% LTV paying a higher fee than 95% LTV of lesser credit score. Na na na na na why are they having to subsidize THOSE people, na na na blah blah blah.
THEY AREN'T. The table of the new fees doesn't include mortgage insurance. Those with over an 80% LTV pay mortgage insurance that covers the lender and does nothing for them. Those with an 80% LTV or better don't. And mortgage insurance is an annual fee (not just a one timer) of .5-1.5%. This transfers the risk to the insurer from the government. Hence the lower one time fee. When we take into account mortgage insurance requirements as we should, we find that the risk tables line up.

Much ado about nothing. But the mighty Wurlitzer of mock outrage syndrome is a hungry beast and must be fed at all times.

​

 

[sam_gordon]

Because, for one thing, it’s controversial, and was bound to create conflict due to the nature of its premise. Perhaps if it was just this one thing it wouldn’t have been so noticeable. But in looking at the big picture, it’s just one more thing that people have to be “angry” about.

I'm enjoying the discussion, and I see what you did with the last phrase.

Had it been discussed, however, it likely would’ve stalled, so that’s why it went forward regardless. But we’re on a slippery slope. Yesterday it was school loans, today it’s this, what will it be tomorrow?

Discussed by who? (rhetorical question). My understanding is this wasn't a "law" or "political" issue. It was enacted by the FHFA, an independent regulatory agency.

I’m at the end of my mortgage-paying days, thankfully, but this does concern me for my kids, who’ve worked hard to do the right things, and are going to have trouble managing the cost of homes today as it is. They will now have to pay even more than before, which was already a lot.

In the grand scheme of things, the amount this increases home prices is small compared to everything else. The sites I've read that shows where they got the numbers (as opposed to a generic "Increasing $40/month), have shown it's going to add anywhere from $500-$1200 to the cost. Heck, over the 20 odd years we've been in this house, it's value has doubled (according to Zillow). I don't think the extra cost based on this addition is going to prevent someone from getting a home.

We can go back and forth with the “fairness” aspect till the cows come home, but at some point, people aren’t going to want to keep paying more and more because they’ve worked hard, unless I’m wrong and people really do want to do that for the ”better good”. But even you yourself have admitted this has the potential to irk you a little bit, I guess depending on amounts? I just see it a different way.

Yes, IMO, the amount matters. If they said this would increase the cost of your home $1 (not per month, not per year, just a one time charge), would people be up in arms about it?

 

[tvguy]

This is a new trend that I have encounter twice now in local restaurants. I understand why a merchant may want to do this, but I don't like it, LOL. In reality the extra charge is relatively small and practically offset by the rewards program on the credit card. I just hope that ALL merchants don't decide to do this, if they do, I may have to start carrying cash which I don't want to do.

They don't have the same price for items on the menu. You pay more for a steak than a hamburger. Really no different, if you pick a more expensive option to pay your tab, they are now charging you for it.. If you want to pay less, pay cash.
I have posted this before, but I always carry cash. About 5 months ago all the gas station debit card networks in our area went off line. I had enough cash to pay for a tank of gas, but there were several folks pulling in looking for a gas station whose debit card network was working because they were on empty and had no cash.

 

[Pea-n-Me]

I'm enjoying the discussion, and I see what you did with the last phrase.



Discussed by who? (rhetorical question). My understanding is this wasn't a "law" or "political" issue. It was enacted by the FHFA, an independent regulatory agency.

Financial and lending overseers; lawmakers, etc.

In the grand scheme of things, the amount this increases home prices is small compared to everything else. The sites I've read that shows where they got the numbers (as opposed to a generic "Increasing $40/month), have shown it's going to add anywhere from $500-$1200 to the cost. Heck, over the 20 odd years we've been in this house, it's value has doubled (according to Zillow). I don't think the extra cost based on this addition is going to prevent someone from getting a home.

I’m not doubting you and what you believe, but I want to know why there are others out there (senators, state auditors, journalists, esteemed Dis posters , to name a few) saying differently. I’m not a big financial person, really, so I’m not debating that part of it. (Otoh, If it was a medical issue, let’s have at it!) It’s just unclear to me at this point what exactly is going on. As a fee-paying American citizen who values “truth in lending”, I’m hoping we get some answers.

Yes, IMO, the amount matters. If they said this would increase the cost of your home $1 (not per month, not per year, just a one time charge), would people be up in arms about it?

I think some might based on the principal of it.

I was in a store the other day and at the register I was asked if I wanted to contribute to a local charity. I said, “Sure, put me down for 5 bucks”. Next thing I know the store manager got on the INTERCOM and says something lIke, “Attention, folks, the generous lady at Register 3 just made a large contribution to our local charity!” I was like, “Omg, what are you doing?” The point is, it was voluntary. Had they told me at the register that I had to pay an extra $5 to a charity I may not have agreed to it, based on principle (and some other factors like I can’t be sure where the money is going and I want to choose the charities I contribute to, etc.).

Again, big picture with this mortgage fee issue. And I really don’t think it’s that people don’t want to help other people, either. I just think they don’t want to be told what they have to do. That’s an American principle, isn’t it?

 

[BleuB]

The way to avoid this altogether is to save up for a house and pay cash for the entirety. Can’t do it? Well, then you are subject to lending terms, and the lenders make the rules along with governing agencies. That is how the system works. It’s not about some Robin Hood theory; if you don’t like it you are welcome to not participate.

 

[mom2rtk]

The way to avoid this altogether is to save up for a house and pay cash for the entirety. Can’t do it? Well, then you are subject to lending terms, and the lenders make the rules along with governing agencies. That is how the system works. It’s not about some Robin Hood theory; if you don’t like it you are welcome to not participate.

One could also say that if you can't afford the higher cost involved if you have poor credit you should choose not to participate rather than rely on higher fees from others.

 

[sam_gordon]

Financial and lending overseers; lawmakers, etc.

So you're assuming no one talked about this? Whoever was in charge of FHFA just said "we're upping the percentage on the fees?" Lawmakers have nothing to do with it, as much as some would like the public to believe.

I’m not doubting you and what you believe, but I want to know why there are others out there (senators, state auditors, journalists, esteemed Dis posters , to name a few) saying differently. I’m not a big financial person, really, so I’m not debating that part of it. (Otoh, If it was a medical issue, let’s have at it!) It’s just unclear to me at this point what exactly is going on. As a fee-paying American citizen who values “truth in lending”, I’m hoping we get some answers.

My honest opinion... SOME people want to "scare" the public so they say something that, if not flat out false, is either hard to prove, or has enough truth it to be believable (go back to my example about "pennies a day"). People hear that statement and repeat it "Can you believe this is what's going on?", it gets picked up on social media, etc and now you have confusion.

People are accepting what they're being told (from both sides) without doing their own fact checking. I've been guilty of it in the past. Sometimes it's hard not to accept what you're told. As I mentioned, the numbers thrown about (adding $40/month) don't make sense. That would mean adding $6000 onto the loan. Now, was the original statement "adding UP TO $40/month" and the 'Up To' got dropped (the game of telephone)? A penny increase a month falls into the "up to $40/month".

I think some might based on the principal of it.

I was in a store the other day and at the register I was asked if I wanted to contribute to a local charity. I said, “Sure, put me down for 5 bucks”. Next thing I know the store manager got on the INTERCOM and says something lIke, “Attention, folks, the generous lady at Register 3 just made a large contribution to our local charity!” I was like, “Omg, what are you doing?” The point is, it was voluntary. Had they told me at the register that I had to pay an extra $5 to a charity I may not have agreed to it, based on principle (and some other factors like I can’t be sure where the money is going and I want to choose the charities I contribute to, etc.).

Again, big picture with this mortgage fee issue. And I really don’t think it’s that people don’t want to help other people, either. I just think they don’t want to be told what they have to do. That’s an American principle, isn’t it?

I get it. BUT, did you try to negotiate any of the fees the last time you got a mortgage? Do you know if those fees were higher/lower than the month before, the year before, the decade before, etc?

 

[BleuB]

One could also say that if you can't afford the higher cost involved if you have poor credit you should choose not to participate rather than rely on higher fees from others.

The people with lower credit scores were not the ones who adjusted the rates and certainly aren’t making a stink about it. The motivation is there for them to increase participation in housing markets. Further, one of the main reasons the FHFA listed for rate adjustment is that the Enterprises are underfunded.

https://www.fhfa.gov/mobile/Pages/p...ctor-Sandra-Thompson-on-Mortgage-Pricing.aspx

 

[mom2rtk]

The people with lower credit scores were not the ones who adjusted the rates and certainly aren’t making a stink about it. The motivation is there for them to increase participation in housing markets. Further, one of the main reasons the FHFA listed for rate adjustment is that the Enterprises are underfunded.

https://www.fhfa.gov/mobile/Pages/p...ctor-Sandra-Thompson-on-Mortgage-Pricing.aspx

Lol what on earth would they be making a stink about?

 

[RamblingMad]

The people with lower credit scores were not the ones who adjusted the rates and certainly aren’t making a stink about it. The motivation is there for them to increase participation in housing markets. Further, one of the main reasons the FHFA listed for rate adjustment is that the Enterprises are underfunded.

https://www.fhfa.gov/mobile/Pages/p...ctor-Sandra-Thompson-on-Mortgage-Pricing.aspx

That’s because everyone wants a mortgage with a double digit rate.