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Edited Date/Time
4/21/2023 1:03pm
https://www.washingtontimes.com/news/2023/apr/18/joe-biden-hike-payment…
Can someone break this down for me? Mortgages and banking are not my wheel house but this sure seems like a lot of people will be getting screwed.
Yes it is, and is another way to potentially create another housing crisis. Although it could be challenged in court or ignored by homebuilder/banks
Might want to move this to the non-moto forum
Its the circle of life, everyone is a socialist until they realize they are the ones funding it
It's not? It is on my phone ?
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I moved it to Non-Moto.
This ploy is a classic Liberal transfer of wealth to further buy votes under the guise of "help".
As usual this will not end well.
Damn, so you're basically getting fined for having a good credit score, and saving enough for a decent down payment. Sounds about right for the upside down world of socialism.
Sound like the usual leftist BS to me.
This is only for loans that will go to Fannie Mae/Freddie Mac (i.e. almost every mortgage in America)...and is a classic example of government trying legislate equal outcome (rather than focusing on its real job of providing equal opportunity), at the expense of common sense.
The interest rate is used to offset the risk of lending someone money, higher the risk higher the rate...so why does it make any sense to offer lower rates to higher risk borrowers? Who get stuck with the nut when that high risk borrower defaults? The government needs to get out of the mortgage business (and the health insurance business, and the college loan business for that matter).
This is all caused by adjustments to the LLPA's (Loan level price adjustments) which show up on mortgage lenders rate sheets as adjustments to the rate-based on borrower qualifications: credit score, debt to income, occupancy type, loan to value ratio etc.-that is quoted to a customer. They are determined by the agencies (Fannie/Freddie). Historically its been the lower the risk-higher the credit score, lower the loan to value ratio, lower DTI, occupancy type, etc.-the lower the rate...the government doesn't like common sense, so they are going to turn that on its head.
"Can someone break this down for me?"
Your government hates that you don't depend on them and wants to punish you.
Plain and simple.
"The government needs to get out of the mortgage business (and the health insurance business, and the college loan business for that matter). "
Didn't the government factor in the profit from the college loan business to pay for the "affordable health care act"?
I think so...and then they tried to forgive all the student loans, attempting to pass not just the student loans on to the tax payers, but also the "affordable" care act...the government is a model of fiscal irresponsibility and stupidity.
I wonder if this will turn into another carrot on the end of the stick for the liberals. "We wanted to make those pesky rich people help you pay home mortgage, but the damn conservative supreme court got in the way."
Here is a great article on this...
https://www.mortgagenewsdaily.com/markets/mortgage-rates-04212023
Question Titan. We have great credit, put 20% down, and have our current house at at a fixed rate of like 2.75% or something. Our last house was financed through JP Morgan/Chase, but about 5 years in they sold our mortgage to another lender and we had to start paying our mortgage to them. To be clear we didn’t initiate this change, basically JP collected all that front loaded interest then moved the loan off their books. If this happens again on our current house and our mortgage is transferred to another lender, would that count as “refinancing” and would we then have to pay this stupidity?
It's an absolute joke is what it is. Another penalty for those who work hard for something in this country.
News flash.. Low income and people struggling have good credit scores too. Meanwhile, there are very wealthy people with poor credit.
No that wouldn't be refinancing, because it would still be the same loan with your agreed upon interest rate. You're just cutting the check to somebody else.
Just tank your credit and you should be good!
🤦🏼♂️🤦🏼♂️🤦🏼♂️
Pit Row
No. In fact all that changed is your “servicer” (who you make your mortgage payment to)….your “note” (the actual mortgage) is likely held by Fannie Mae/Freddie mac anyway…and that hasn’t changed…but because they don’t actually service mortgages they pay a fee to banks to handle the servicing and banks transfer the servicing rights to mortgages all the time.
Don't forget to work less while you're at it so you can qualify for a government subsidy to help pay for health insurance, nutrition assistance, and a cell phone. Just keep being poor and it's all free.
This, I’ve been working my ass off trying to buy a house for a while now and have great credit, guess that’s not in line with the narrative geriatric dick head wants to push. To me this is more about wealth preservation than anything, the older generations hold all the assets and have already seen their retirements get cut significantly with the stock and bond market downturn last year, if housing prices were to also meaningfully fall it’s gonna be a tough election cycle for POS Joe and his friends and they know it. Easiest way to prop up prices is to undermine Fed tightening and backstop sketchy loans to people who shouldn’t be getting them, bunch of corrupt fucks.
To be clear…this doesn’t mean people with lower credit scores will have a lower rate than someone with a higher credit score…it essentially means that the lower credit score won’t hurt them as much-relative to the higher credit score borrower.
for example (with purely fictional numbers):
Before the changes a 780 credit score might have a rate of 6% and a 650 credit score a rate of 7%.
Now the 780 score gets a rate of 6.125% and the 650 score has a rate of 6.75%.
If that makes sense?
Does not seem like a good idea to me.
I see the general thought process. People with low credit scores often (not always!) come from an impoverished or lower income family and are always a step behind when trying to buy houses in comparison to someone who came from a better family home. So, obviously, when buying a home, it’s smart business for the lender to have a higher rate for those who are higher risk (I.e. lower credit score). The government is stepping in and trying to prevent that.
But, going about it this way is not the way to do it in my opinion. Anyone making the purchase before May 1 will not be impacted, unless of course you refinance.
The one thing I strongly believe the government needs to do in the housing market is to prevent massive corporations outbidding families to buy up as many homes as they can and renting them out. That’s Standard Oil 2.0. and it’s easy to see where that ends up.
I really don’t believe the rates of people with higher credit scores had to be messed with at all to help out those with lower credit scores. If they wanted to do things to help with their housing situation or their ability to buy a house, I’m fine with that. We spent 300 million per day for 20 years in Afghanistan, so we obviously have a lot of extra money since we aren’t there anymore. I just really don’t believe raising the rates of people with higher credit scores is the way to go.
It seems like they want to continue lending money to high risk borrowers and they'll use the low risk borrowers as a means to gather funds in case the high risk borrows come up lame on the payments?
Findings like this probably have at least something to do with it. I wouldn’t be surprised to find out that credit scores are much more correlated to credit card or even auto defaults than they are home loan defaults. I would even believe that they correlate more to auto and home insurance claims than home loan defaults.
https://www.ocregister.com/2021/05/27/credit-scores-dont-predict-mortga…
Though the author of that is right (or at least I agree with him) that there is not nearly enough room for common sense in the mortgage industry underwriting these days (among other things, there is way to much emphasis on credit score, and not nearly enough on the reason/s behind the score)...I do believe credit score is a reasonably reliable way to assess risk.
I look at that study very skeptically (from the little details the article gives about it)..."estimating" a "stressed default rate", based on how a loan (made any time between 1990 and 2019-with drastically different economic circumstances, and housing market conditions) would have performed during the start of the 2008 financial crisis...leaves way to many unaccounted variables.
But big picture...I would have a very hard time believing that across all consumers, an average individual with an 800 credit score is going to be the same risk as the average individual with a 600 credit score (though there will be outliers, that would be the exception to the rule). Which is why I think credit score is still a reasonably reliable way to assess borrower risk.
I've been looking at credit scores for 20 years...and the vast majority of low credit borrowers aren't there for extenuating circumstances (major health issues, death of a primary wage earner, etc. The most common reason I see for low credit is divorce), they are for financial mismanagement.
Shades of the old, dodd/frank mortgage bubble of years past.
So once again, our federal government is allowing people who can't afford it, to get upside down on a home mortgage before they even unpack their meager belongings.
And...
With my money, and yours.
All of that on top of an economy teetering on the brink.
And a dollar that most of the rest of the world is turning its back on.
Shit's getting old.
That's a bit melodramatic...
Dodd/Frank came AFTER the mortgage bubble...and, basically, required certain borrower documentation standards in order for loans to be bought and sold on wall street, and to be sold to fannie mae/freddie mac. (it did away with the "stated income", "no doc" loans that were so popular leading up to the 08 recession...it didn't allow them.)
These changes don't change loan guidelines...they don't allow higher risk loan programs...these borrowers still have to document their income, assets, employment to qualify for a mortgage (so the government isn't allowing people who can't afford it to buy a home). Their low credit score just doesn't impact their rate as much as it would have.
Most of the rest of the world isn't turning its back on the dollar...china and russia are trying to get the world to turn its back on the dollar...it's not likely they will be successful.
As for being upside down...there is still only 2.5 months of supply of houses are the market (average-and considered normal-is over 4 months of supply), so there is a drastic housing shortage across the country (there may be pockets in the country where that isn't true however)....so as mortgage rates continue to fall with inflation...and as soon as they get to the low 5's, you will see the housing market pick back up and the largely flat appreciation rates from the past year, will see positive numbers again, as buyers return to the market. it won't be 15% or 20% appreciation rates...values are already to high, and rates-even in the low 5's-are still to high to justify another massive jump in home values. It might only be 1% or 2% appreciation...
Economy is teetering...but resilient.
Not melodramatic at all.
I realize you have a background in real estate.
But my entire life, I've had family in real estate and property management.
I've bought, paid for, and sold multiple homes over the years.
And we've worked our asses off to own outright, two homes, and have three lucrative short term rentals bordering the GSMNP.
And...
I've made my career un upper end homebuilding.
(When the rich have theirs, I have mine)
So I'm quite aware of how our government fucks over hard working Americans.
And how what we're seeing now is nothing more than more of the same.
All in the name of, racial justice.
Don't kid yourself.
That's what the driving force is here.
They're creating another bubble, that wil burst, in doing so.
Just as before.
That centrally-planned socialism tastes a little more sour than you thought it would huh?
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