The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, will implement a new rule under the Biden administration requiring good-credit home buyers to pay higher mortgage costs to subsidize loans for high-risk borrowers. Experts predict that borrowers with a credit score of around 680 would pay an additional $40 per month on a $400,000 mortgage to support people with lower credit ratings seeking a mortgage. However, some industry insiders believe the new rule will only lead to frustration and confusion for consumers during an already overwhelming process.
Former commissioner of the Federal Housing Administration, David Stevens, expressed disappointment in the new rules, stating that attempting to manipulate prices and credit is not the solution to the issue of a gap in homeownership opportunities for low-income, predominantly minority borrowers. Stevens noted that America is facing a severe shortage of affordable homes for sale and excess demand, causing an imbalance. While there may be a need to narrow the gap in access to credit, convoluting pricing and credit is not the solution.
Under the new rule, consumers with lower credit ratings and less money for a down payment will qualify for better mortgage rates than they otherwise would have. Federal Housing Finance Agency Director Sandra Thompson believes that the new rules are designed to “increase pricing support for purchase borrowers limited by income or by wealth” and come with minimal fee changes. However, some experts, such as Ian Wright, a senior loan officer at Bay Equity Home Loans, believe that the changes do not make sense, as penalizing borrowers with larger down payments and credit scores will not be well-received by consumers.
