OAN Roy Francis
UPDATED 11:45 AM – Saturday, April 22, 2023
A new Biden administration rule that is set to go into effect will force homeowners with good credit to pay more on their mortgages in order to subsidize loans to high-risk borrowers.
Experts are reporting that the new rule will force borrowers who have a credit score over 680 to pay $40 more every month on a mortgage that is $400,000, however the payments could be higher depending on the size of the mortgage. The new rule comes from the Federal Housing Finance Agency (FHFA) and is set to go into effect on May 1st.
According to the Washington Times, the extra payments, on top of the already set mortgage payments, are meant to help subsidize those with lower credit ratings, who are also looking for a mortgage. The new rule will also allow consumers with lower credit scores to qualify for better mortgage rates.
This comes as part of an effort by FHFA to make housing options more affordable to consumers, however, those in the industry say that the new rules that the agency is implementing will “frustrate and confuse people.”
Former commissioner of the Federal Housing Administration under Obama, David Stevens, took to social media to respond to the new rule saying that this “couldn’t come at a worse time.”
“This confusing approach won’t work and more importantly couldn’t come at a worse time for an industry struggling to get back on its feet after these past 12 months,” he said. “To do this at the onset of the spring market is almost offensive to the market, consumers, and lenders.”
Stevens went on to say that the reason the changes are now being implemented is to “narrow the gap in access to credit” and because America currently has an imbalance in supply and demand of affordable homes.
“Why was this done? The answer is simple, it was to try to narrow the gap in access to credit, especially for minority home buyers who often have lower down payments and lower credit scores,” Stevens said. “The gap in homeownership opportunity is real. America is facing a severe shortage of affordable homes for sales combined with excessive demand causing an imbalance. But convoluting pricing and credit is not the way to solve this problem.”
Ian Wright, a senior loan officer with Bay Equity Home Loans, told the Washington Times that the changes make no sense and that it is overcomplicating an already overwhelming process.
“The changes do not make sense. Penalizing borrowers with larger down payments and credit scores will not go over well,” Wright 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.”
Real estate experts have expressed their concerns that the new changes are “very concerning” due to the state of the United States housing market.
According to data from the National Association of Realtors (NAR), sales of previously owned homes has gone done 2.4% in March from the prior month. On an annual basis, the sales of existing homes are down 22% compared to the same time in 2022.
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