People have, traditionally, been rewarded for having good credit scores, but a new Biden Administration mortgage fee may do just the opposition, Fox News Host Sandra Smith observed, in a discussion with Former Federal Housing Administration Commissioner David Stevens.
Smith interviewed Stevens Thursday on “America Reports,” to get his reaction to a new fee that will be added to the monthly mortgages of home buyers who have good credit scores.
Starting next month, homebuyers with good credit will have to pay a monthly mortgage fee to subsidize people with bad credit who want mortgage loans, but can’t afford or qualify for one.
The fee, which was instituted by a Biden Administration rule – not by Congress – adds about $40 more a month ($480 per year) to the mortgages of those with credit scores of 680 buying homes in the $400,000 range.
“Obviously, the peril in this is that you’re incentivizing bad credit scores, to get lower costs,” Smith told Stevens, who said a mortgage lending executive had just told him the same thing:
"I literally just got an email from an executive with a mortgage lending company. He goes, ‘So I guess we have to teach borrowers to worsen their credit before they apply for a mortgage, in order to get the better price.’
“I mean, that's a bit of an extreme, but yes.”
“There’s only so long this could last,” Smith said, noting that, if there are fewer people with good credit, there’ll also be fewer people to subsidize those with bad credit:
“You won’t be able to pay for the risky home buyers, if people are incentivized to have lower credit.”
"This has really convoluted the entire discipline and credit risk pricing structure that Fannie Mae and Freddie Mac have followed since their inception," Stevens said. "I think it violates the entire discipline that these two companies have operated under”:
“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."