Thinking of closing out on your mortgage? Think again – rates have significantly increased for many homebuyers.
The Federal Housing Finance Agency (FHFA) implemented major changes on Monday; changes to the fee structure of conventional mortgages guaranteed by the Federal National Mortgage Association, known as Fannie Mae, and the Federal Home Loan Mortgage Corporation, also known as the Freddie Mac.
These changes would effectively lower the fee gap between borrowers with high credit scores and those with low ones. In a governmental effort to make “homeownership more affordable” for underserved communities and first-time buyers, middle-income homebuyers argue its disadvantages to those more financially prepared to buy a house.
The new fee structure went into effect on May 1 with a group of financial offices representing 27 U.S. states having sent a letter to President Biden and FHFA director Sandra Thompson looking to eliminate this change, altogether.
“The hope is that this helps ease the affordability crisis in this country,” Bess Freedman, chief executive officer at New York brokerage Brown Harris Stevens, says. Still, she adds, “hearing that one may be in essence punished for having good credit could pose yet another psychological and financial barrier,” to homeownership.
In simpler terms, the new changes show that the higher ones credit score is along with a larger down payment, the more they have to pay monthly.
FHFA fees, also called loan level pricing adjustment (LLPA) fees were added to convention loan lending since 2008, designed to ensure the “stability and soundness” of Fannie Mae and Freddie Mac. Referred to as “upfront fees,” the practice realistically bleeds into homebuyers interest rates, and ultimately their mortgage rates.
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