Borrowers who put down less than 5 percent on their mortgage are having their fees reduced, no matter their credit score.
For all the talk about a potential recession, the Biden administration doesn’t seem to care much about damaging the economy. Witness the latest attempt to impose “equity” that will only raise costs, while hurting the housing market in the process.
Beginning today, the Federal Housing Finance Agency (FHFA), which governs Fannie Mae and Freddie Mac, is changing the fees those enterprises charge on new mortgages. FHFA claims the changes will “more accurately align pricing with the expected financial performance and risks of the underlying loans.”
Nice try. What the changes will really do is reduce fees for people with lower incomes and lower down payments. In other words, people with higher credit risks paid for by higher fees on lower-risk borrowers. Or, as Barack Obama more colloquially put it, FHFA is “spreading the wealth around.”
Encouraging Risky Behavior
FHFA arose from the taxpayer-funded bailout of Fannie and Freddie during the 2008 financial crisis. The changes the agency is imposing this week are part of a larger review of the guarantee fees the entities charge, purportedly to ensure they reflect the risk of default on behalf of the borrower.
FHFA recently published a blog post attempting to defend the changes. In doing so, it attacked what it dubbed “misconceptions” about the proposal, including this one: “Higher-credit-score borrowers are not being charged more so that lower-credit-score borrowers can pay less. The updated fees, as was true of the prior fees, generally increase as credit scores decrease for any given level of down payment.”