Interest Rate and Credit Score

[sam_gordon]

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

I thought you were complaining about people not understanding/reporting being poor... this has NOTHING to do with Interest Rate, right? It's changing A fee lenders will charge by ~0.5%. So why are you bringing up "double digit" rates?

 

[Pea-n-Me]

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?"

It does appear that way.

https://www.fhfa.gov/Media/PublicAf...ctor-Sandra-Thompson-on-Mortgage-Pricing.aspx

It had been many years since a comprehensive review of the Enterprises’ pricing framework was conducted. FHFA launched such a review in 2021.

We took a series of steps over the past 18 months to achieve these objectives. First, we announced targeted fee increases for second home loans and high balance loans and, later, cash-out refinances. Next, we announced the elimination of upfront fees for certain groups core to the Enterprises’ mission, such as first-time homebuyers with lower incomes who nonetheless have the financial capacity and creditworthiness to sustain a mortgage. Finally, in January, we announced a recalibration of the upfront fees for most purchase and rate-term refinance loans. These actions work collectively to create a more resilient housing finance system.

https://www.bostonherald.com/2023/0...to-mortgage-fees-already-impacting-borrowers/

David Stevens, who served as a Federal Housing Administration commissioner under former President Barack Obama, told the New York Post that the Biden Administration’s decision to change the Loan Level Price Adjustments to the degree the FHFA has is “unprecedented.”

“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, who previously served as CEO of the Mortgage Bankers Association, told the Post.

https://www.bostonherald.com/2023/0...it-scores-fall-for-those-with-lower-scores-2/



https://www.rubio.senate.gov/public...biden-policy-to-make-mortgages-more-expensive

Specifically, on January 19, 2023, FHFA announced via press release its intent to re-write the single- family pricing framework for the government-sponsored entities (GSEs) Fannie Mae and Freddie Mac. This announcement, scheduled to take effect May 1, 2023

We request a written response to the following questions no later than May 10th.

1. Did FHFA conduct an economic or housing-market cost-benefit or impact analysis of its planned change to the Single-Family Pricing Framework? If so, please provide all analysis conducted and its findings. If not, please provide FHFA’s reasoning for why analysis of this major change was not conducted.
2. Does FHFA believe these changes will impact the safety and soundness of housing finance markets? Please provide the rationale for your response.
3. Did FHFA conduct a notice and comment period for its updates to the Single-Family Pricing Framework? If so, please provide the list of stakeholders and organizations that FHFA considered comments from. If not, please provide FHFA’s reasoning for why industry comment and collaboration was not conducted.

 

[sam_gordon]

It does appear that way.

https://www.fhfa.gov/Media/PublicAf...ctor-Sandra-Thompson-on-Mortgage-Pricing.aspx

It had been many years since a comprehensive review of the Enterprises’ pricing framework was conducted. FHFA launched such a review in 2021.

We took a series of steps over the past 18 months to achieve these objectives. First, we announced targeted fee increases for second home loans and high balance loans and, later, cash-out refinances. Next, we announced the elimination of upfront fees for certain groups core to the Enterprises’ mission, such as first-time homebuyers with lower incomes who nonetheless have the financial capacity and creditworthiness to sustain a mortgage. Finally, in January, we announced a recalibration of the upfront fees for most purchase and rate-term refinance loans. These actions work collectively to create a more resilient housing finance system.

https://www.bostonherald.com/2023/0...to-mortgage-fees-already-impacting-borrowers/

David Stevens, who served as a Federal Housing Administration commissioner under former President Barack Obama, told the New York Post that the Biden Administration’s decision to change the Loan Level Price Adjustments to the degree the FHFA has is “unprecedented.”

“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, who previously served as CEO of the Mortgage Bankers Association, told the Post.

https://www.bostonherald.com/2023/0...it-scores-fall-for-those-with-lower-scores-2/

View attachment 758503

https://www.rubio.senate.gov/public...biden-policy-to-make-mortgages-more-expensive

Specifically, on January 19, 2023, FHFA announced via press release its intent to re-write the single- family pricing framework for the government-sponsored entities (GSEs) Fannie Mae and Freddie Mac. This announcement, scheduled to take effect May 1, 2023

We request a written response to the following questions no later than May 10th.

1. Did FHFA conduct an economic or housing-market cost-benefit or impact analysis of its planned change to the Single-Family Pricing Framework? If so, please provide all analysis conducted and its findings. If not, please provide FHFA’s reasoning for why analysis of this major change was not conducted.
2. Does FHFA believe these changes will impact the safety and soundness of housing finance markets? Please provide the rationale for your response.
3. Did FHFA conduct a notice and comment period for its updates to the Single-Family Pricing Framework? If so, please provide the list of stakeholders and organizations that FHFA considered comments from. If not, please provide FHFA’s reasoning for why industry comment and collaboration was not conducted.

First, it appears what way? That the head of FHFA decided on his(?) own to raise rates? Then why does the article you're quoting keep using the word "we"?

Second, according to the chart, those people with a credit score of 780+ WILL pay more in fees. On a $1 MILLION dollar loan, they will pay an extra $1250. (Going from $3750 to $5000). That will increase their monthly payment by $9, on a $1 MILLION dollar loan.

On a $500,000 loan, they pay an extra $4.50/month? Let's see... $500,000 * 0.375% (old rate)= $1875.0. $500,000 * 0.5% = $2500. $2500-$1875 = $625 more. Over the life of the loan... yup, $4/month. Obviously the lower the loan, the less that cost will be. Sorry, I can't feel sorry for them, and that includes me.

OK, everyone else pays less in fees than they did before, BUT still more than those with 780+ credit ratings.

 

[RamblingMad]

I thought you were complaining about people not understanding/reporting being poor... this has NOTHING to do with Interest Rate, right? It's changing A fee lenders will charge by ~0.5%. So why are you bringing up "double digit" rates?

Those that would benefit the most are likely subprime. Those mortgages today are likely printing with double digit rates. I doubt many of these are even being originated given housing affordability. The reality is that they’ll collect more fees from the better credit, and there won’t be any impact on the low end due to the lack of originations.

The NY Fed prints the credit distribution of mortgages every month. I’ll link it later.

https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2022Q4

 

[mefordis]

I wish people would do more research, such as reading articles like this, instead of blindly following. Certain news channels thrive off of creating outrage. Don't take the bait, people!

The news seems to continuously focus on trying to get one group of people mad at another group of people.

 

[mom2rtk]

The news seems to continuously focus on trying to get one group of people mad at another group of people.

So do a fair number of politicians.

 

[RamblingMad]

The news seems to continuously focus on trying to get one group of people mad at another group of people.

That’s how they get clicks.

 

[BleuB]

The news seems to continuously focus on trying to get one group of people mad at another group of people.

So do a fair number of politicians.

At the end of the day this is where we all agree.

When it comes to policy the most important measure is the overall benefit to society. I honestly do not believe that this really helps or hurts anyone much, just shifting fee percentages around so that the enterprises can get more money overall. Some people get on board because they believe the “benefit to the disadvantaged” but a minuscule fee decrease doesn’t move the needle at all. At the same time though neither does a minuscule increase.

My theory is that the increase on higher scoring individuals is because they tend to purchase homes of higher value. The enterprises will get more money from that pool through small increases. The wealth redistribution claims are inflammatory, which is why they (media/politicians) keep making them.

 

[nick262]

First, it appears what way? That the head of FHFA decided on his(?) own to raise rates? Then why does the article you're quoting keep using the word "we"?

Second, according to the chart, those people with a credit score of 780+ WILL pay more in fees. On a $1 MILLION dollar loan, they will pay an extra $1250. (Going from $3750 to $5000). That will increase their monthly payment by $9, on a $1 MILLION dollar loan.

On a $500,000 loan, they pay an extra $4.50/month? Let's see... $500,000 * 0.375% (old rate)= $1875.0. $500,000 * 0.5% = $2500. $2500-$1875 = $625 more. Over the life of the loan... yup, $4/month. Obviously the lower the loan, the less that cost will be. Sorry, I can't feel sorry for them, and that includes me.

OK, everyone else pays less in fees than they did before, BUT still more than those with 780+ credit ratings.

You are reading it backwards. The column on the right is the prior fees. The one on the left is the new fees. For those in the 740 increase by $3,750 and those in the 720-739 range go up $5,000. It is not the $500 people are tossing around.

 

[sam_gordon]

You are reading it backwards. The column on the right is the prior fees. The one on the left is the new fees. For those in the 740 increase by $3,750 and those in the 720-739 range go up $5,000. It is not the $500 people are tossing around.

You're right, I was reading it backwards. However, you're wrong in your interpretation also (the following is assuming the chart is correct).
1) Someone with a 780 or better score in the OLD way paid a 0.5% fee on their loan. In the NEW way, it would be a 0.375%. That's a discount.
2) The chart is based on a $1 MILLION dollar loan. When I brought up $500 earlier, that was based on a $400,000 loan. The loan FEE is the % * loan amount. So a smaller loan would equal a smaller fee. I did the math above, don't feel like doing it again. Figure out the fee that would be paid under the old percentage and the fee that will be paid on the new percentage, subtract the two.
3) So, those with 780+, the rates go down 0.125%,
760-779 the rates go up 0.125%
740-759 up 0.375%
720-739 up 0.5%
700-719 up 0.125%
680-699 no change
660-679 down down 0.875%
640-659 down 0.75%
Under 640 down 0.75%

So those with "EXCELLENT" credit actually SAVE money in fees. The largest 'increase" causes a $5,000 increase (keep in mind that's on a $1M loan). That's an extra $35/month. Now at least we're getting CLOSE to the $40/month that was talked about earlier. But again, those with 780+ are SAVING money.

Those who talked about "tanking" their credit to save money, still think that's a good idea?
Again, this is assuming the chart is correct.

 

[GreatLakes]

There are so many fees built into most loans this isn't anything that most people will notice. Credit Scores are used for more than just financing so I can't imaging trying to lower mine to save a few %, or tenths of a %, on a loan. We have a minimum credit score to even be hired at my place of employment.