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An Obama-era housing official has reportedly criticized President Joe Biden’s mortgage plan, saying it is an “unprecedented move” and that it is “not the way” to bring in more buyers.
What Happened: “We can do better programs to help more minorities get into home-ownership. This is not the way to do it,” said former Federal Housing Administration Commissioner David Stevens, according to a Fox Business report.
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New rules from the Federal Housing Finance Agency, or FHFA, will permit consumers with lower credit ratings and less down payment funds to qualify for better mortgage rates than they otherwise would have, the report said.
However, the costs are anticipated to be passed on to buyers with good credit, it said, adding that the rules will go into effect from May 1.
Higher Costs: Mortgage industry experts believe homebuyers with credit scores of 680 or higher will pay, for instance, close to $40 a month more on a home loan of $400,000, reported The Washington Times.
“For the first time ever, the [FHFA] director, in an effort to bring more first-time homebuyers — particularly minority homebuyers into the GSE’s lending programs — made a shift where she lowered the fees being charged to borrowers with low down payments and low credit scores and the way she compensated or they compensated for that loss of income, that capital costs that they’re going to incur, is they’re actually raising fees on better creditworthy borrowers who are putting down much larger down payments,” Stevens said, according to the Fox Business report.
The expert said this has convoluted the discipline and credit risk pricing structure that Fannie Mae and Freddie Mac have followed since their inception.
“And it’s going to end up costing some borrowers who are putting in 15, 20% down payments, who have credit scores in the seven hundreds and above more for their mortgage so they can help pay for those who are getting the discount,” Stevens warned.
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