High credit score borrowers penalized under new federal mortgage fee plan (2023)

Mortgage borrowers with good credit may face higher costs under a new scheme from federal mortgage associations Fannie Mae and Freddie Mac.The firms have released a new Loan–Level Price Adjustment (LLPA) Matrix for loans sold to them after May 1, 2023. Under the new matrix, borrowers with high credit scores will face higher mortgage fees than before and those with lower credit scores will face lower fees.

"It's unprecedented," David Stevens, a former federal housingcommissioner and former CEO of the Mortgage Bankers Association, told the New York Post. "My email is full from mortgage companies and CEOs [telling] me how unbelievably shocked they are by this move."

The fee increase is unlikely to lead to significantly higher monthly mortgage payments for most borrowers. For instance, someone with a $400,000 loan and a 6 percent mortgage rate may wind up paying about $40 more per month, according to Stevens' calculations.

But an extra $40 per month means an extra $480 per year. And over the whole course of mortgage repayment, a homeowner could wind up paying thousands of dollars more due to the fee shift.

Regardless of what the shift means in terms of actual costs, it seems unfair that borrowers with extremely good credit are effectively being penalized while borrowers with lower credit scores are being rewarded.

"This was a blatant and significant cut of fees for their highest-risk borrowers and a clear increase in much better credit quality buyers – which just clarified to the world that this move was a pretty significant cross-subsidy pricing change," Stevens said.

"Overall, lower-credit buyers will still pay more in LLPA fees than high-credit buyers – but the latest changes will close the gap," notes the Post:

Under the new rules, high-credit buyers with scores ranging from 680 to above 780 will see a spike in their mortgage costs – with applicants who place 15% to 20% down payment experiencing the biggest increase in fees….

LLPAs are upfront fees based on factors such as a borrower's credit score and the size of their down payment. The fees are typically converted into percentage points that alter the buyer's mortgage rate.

Under the revised LLPA pricing structure, a home buyer with a 740 FICO credit score and a 15% to 20% down payment will face a 1% surcharge – an increase of 0.750% compared to the old fee of just 0.250%….

Meanwhile, buyers with credit scores of 679 or lower will have their fees slashed, resulting in more favorable mortgage rates. For example, a buyer with a 620 FICO credit score with a down payment of 5% or less gets a 1.75% fee discount – a decrease from the old fee rate of 3.50% for that bracket.

Mortgage News Daily explained it this way in January when the changes were announced:

The effective penalty for having a credit score under 680 is now smaller than it was. It still costs more to have a lower score. For instance, if you have a score of 659 and are borrowing 75% of the home's value, you'll pay a fee equal to 1.5% of the loan balance whereas you'd pay no fee if you had a 780+ credit score. But before these changes, you would have paid a whopping 2.75% fee. On a hypothetical $300k loan, that's a difference of $3750 in closing costs.

Elsewhere in the spectrum, things got worse. Borrowers with higher credit scores will generally be paying a bit more than they were under the previous structure.…This doesn't necessarily come out of your pocket upfront as lenders can offer higher interest rates in some cases and pay these costs for you (but the costs are still there, and still technically being paid by you over time in the form of higher interest rates).

Federal Housing Finance Agency Director Sandra L. Thompson called it "another step to ensure that [Fannie Mae and Freddie Mac] advance their mission of facilitating equitable and sustainable access to homeownership."​​


Buzzfeed News is shutting down. Former Editor in Chief Ben Smith (now editor in chief of Semafor) explores what went wrong—a story that mirrors larger shifts in the internet-media ecosystem and the evolution of social media platforms and public opinion about them.

"The end of BuzzFeed News also signals a vast shift in digital media that those of us who live inside it are feeling intensely right now, the end of one era and the beginning of another," wrote Smith:

[Buzzfeed co-founder Jonah] Peretti had built BuzzFeed into a traffic juggernaut by being among the first to see the rising social web. But BuzzFeed never found a new path when that trend turned against us — when consumers found their Facebook feeds toxic, not delightful; when platforms decided news was poison; and when Facebook, Twitter, and the rest simply stopped distributing links to websites.

Peretti created BuzzFeed in 2006 while he was working at Huffington Post, as it was then called, which he co-founded. In 2020, BuzzFeed — shaky but still apparently ascendant —acquired HuffPost off the hands of its latest owner, Verizon. (As I recall, they basically paid BuzzFeed to take it off their hands.)

But as the social tide receded, HuffPost's giant, old-fashioned front-page, has remained surprisingly vital. In its first iteration as a liberal answer to the Drudge Report, it had hooked a generation of baby boomers in the mid-aughts with a mix of giddy coverage of Barack Obama and salacious celebrity gossip. Drudge and Huffington Post, the old portals that propped up the internet of the mid-aughts, will outlive the social media age, along with, of all things, Yahoo!.


A new report from the R Street Institute shows alcohol delivery is not correlated to higher rates of alcohol consumption. The report is based on recent data from the National Institute on Alcohol Abuse and Alcoholism (NIAAA) Surveillance Report, which R Street compared to state alcohol delivery rules.

"News stories during the pandemic suggested that liberalizing alcohol delivery laws was causing Americans to drink more," notes C. Jarrett Dieterle, a resident senior fellow at the R Street Institute and the author of Give Me Liberty and Give Me a Drink!

As one Washington Post headline from December 2021 put it: "States rushed to loosen alcohol laws in the pandemic. Heavy drinking went up, some studies say."

The problem is that these "studies" said no such thing. It was clear that more states were allowing alcohol delivery. And there was also evidence showing that Americans were drinking more during COVID-19. But there were no studies showing a connection between these two things. In fact, numerous researchers suggested that "social stressors" like loneliness and greater demands during the pandemic were the likeliest causes of increased consumption.

More here.


More good news out of TN today: the legislature unanimously passed a bill requiring TDOC to equip people leaving prison with a state ID, certified copy of their birth certificate & social security card. Thank you @RepAndrewFarmer & Sen. @ToddGardenhire! pic.twitter.com/7YpdVRKO3E

— Lauren Krisai (@laurenkrisai) April 21, 2023

• Starship, the uncrewed rocket launched by SpaceX yesterday, exploded midair.

• Stacey Plaskett, a Democratic delegate to Congress from the U.S. Virgin Islands, is accusing writer Matt Taibbi of perjury. "The congresswoman's basis for accusing Taibbi of perjury is a handful of errors that he made during the publication of the Twitter Files," notes Reason's Robby Soave. But while "it is true that Taibbi made some errors…it is obviously not the case that Taibbi committed perjury."

• PEN America's latest banned books report is out. "During the first half of the 2022-23 school year PEN America's Index of School Book Bans lists 1,477 instances of individual books banned, affecting 874 unique titles," the organization says.

• From The Free Press: "Having a baby made me even more pro-choice."

• A bill in Alabama (H.B. 229) "would create a review process for the possible resentencing or release" of incarcerated people age 50 and up who have already served at least 15 years in prison and were not in for "a crime that involved serious physical injury to a victim," notes the Alabama Political Reporter.

• "The populist right stumbles into boilerplate progressivism — again," laments Noah Rothman at National Review.

• Utah is making it easier for out-of-state and foreign workers to get licensed to work in the state.

• "Kansas' governor vetoed legislation Wednesday that would require clinics to tell patients that a medication abortion can be stopped using an unproven drug regimen," reports the Associated Press.


What is bidens new mortgage rules? ›

On May 1st, at the direction of President Biden, the Federal Housing Finance Agency (FHFA) implemented new rules that will increase mortgage payments for homeowners with higher credit scores and redistribute those funds to individuals with low credit scores.

What is the new Biden rule for May 1? ›

Under new rules from the Federal Housing Finance Agency (FHFA) set to take effect May 1, borrowers with lower credit ratings and less money for a down payment will qualify for better mortgage rates than they otherwise would have, while those with higher ratings will pay increased fees.

Does my credit score affect my closing cost? ›

Lenders say those with higher credit scores and more savings will usually put more money down on a house, like 20%. With this fee adjustment, they'll see an increase in fees typically on closing costs.

Is the new mortgage law effective May 1? ›

Beginning May 1, 2023, the updated fees and costs that apply to most new mortgages in the United States will go into effect. This change was originally announced in January of 2023 by the Federal Housing Finance Agency (“FHFA”), which is the agency that regulates Fannie Mae and Freddie Mac.

What are the new FHA changes for 2023? ›

by 30 Basis Points to Support Affordable Homeownership

The Federal Housing Administration (FHA) announced today through Mortgagee Letter 2023- 05 a 30 basis point reduction to the Annual Mortgage Insurance Premiums (annual MIP) it charges borrowers for FHA-insured Single Family Title II forward mortgages.

What is the new general qualified mortgage rule? ›

Under the amended rule, a loan will meet the General QM definition if the annual percentage rate (APR) exceeds the average prime offer rate (APOR) for a comparable transaction by less than 2.25% (or up to 6.5% depending on the loan amount and transaction type) at the time the interest rate is set.

What is bidens immigration policy? ›

Expand Border Patrol capacity for holding migrants and increase Immigration and Customs Enforcement removal flights, doubling and tripling some for certain countries. Open processing centers in countries where people can apply for legal immigration to the U.S., Canada, Spain and other countries.

How will mortgage rates change in 2023? ›

“[W]ith the rate of inflation decelerating rates should gently decline over the course of 2023.” Fannie Mae. 30-year fixed rate mortgage will average 6.4% for Q2 2023, according to the May Housing Forecast. National Association of Realtors (NAR).

Does high credit score mean high interest rate? ›

A higher score increases a lender's confidence that you will make payments on time and may help you qualify for lower mortgage interest rates and fees.

What is the 43 mortgage rule? ›

As a general guideline, 43% is the highest DTI ratio a borrower can have and still get qualified for a mortgage. Ideally, lenders prefer a debt-to-income ratio lower than 36%, with no more than 28% of that debt going towards servicing a mortgage or rent payment. 2 The maximum DTI ratio varies from lender to lender.

What is the 1 3 rule mortgage? ›

As a rule of thumb, many people estimate they are able to afford a mortgage of 2 to 3 times their. household income. For example, if you annual income is $30,000, you might be able to afford a. mortgage of $60,000 to $75,000: $30,0000 X 2 = $60, 000.

When can you lock in new mortgage rate? ›

You can usually lock in a new mortgage offer three to six months before you need it to start. So in February, even if your deal expires in June, you could lock in February's rate for the future and continue to the end of your term with your current mortgage provider. If rates rise, you've a cheaper deal locked in.

Will mortgage rates go down in 2023 or 2024? ›

We're talking 30-year fixed rates nearly 0.75% lower by the end of 2023 than in their previous forecast. And mortgage rates that could flirt with the high-4% range by the end of 2024. This would be welcome news to both existing homeowners and those still looking to buy. Let's dig into the details.

What will a 30-year mortgage be in 2023? ›

As of June 2, 2023, the 30-year fixed mortgage rate is 7.13%, the FHA 30-year fixed rate is 7.14%, the VA 30-year fixed rate is 7.08% and the jumbo 30-year fixed rate is 6.27%.

What is the golden rule on a mortgage? ›

The 28/36 rule states that your total housing costs should not exceed 28% of your gross monthly income and your total debt payments should not exceed 36%. Following this rule aims to keep borrowers from overextending themselves for housing and other costs.

What is the debt to income ratio for a qualified mortgage? ›

Most conventional loans allow for a DTI of no more than 45 percent, but some lenders will accept ratios as high as 50 percent if the borrower has compensating factors, such as a savings account with a balance equal to six months' worth of housing expenses.

What are the 4 types of qualified mortgages? ›

There are four types of QMs – General, Temporary, Small Creditor, and Balloon-Payment.

What is the new immigration bill 2023? ›

Sánchez will introduce the U.S. Citizenship Act of 2023, a humane, common-sense, and long-overdue approach to solving our immigration challenges. This legislation, sent to Congress by President Joe Biden in 2021, restores humanity and American values to our immigration system.

What is the 7 year green card bill? ›

The new immigration registry bill would replace the 1972 cutoff date with a rolling eligibility, allowing individuals to apply for registry after living continuously in the United States for at least seven years and meeting certain admissibility requirements.

Will mortgage rates go down in October 2023? ›

We expect that 30-year mortgage rates will end 2023 at 5.2%,” the organization noted in its forecast commentary. It since has walked back its forecast slightly but still sees rates dipping below 6%, to 5.6%, by the end of the year.

Will mortgage rates go back down in 2024? ›

Fannie Mae, Mortgage Bankers Association and National Association of Realtors expect mortgage rates to drop through the first quarter of 2024, by half a percentage point to about nine-tenths of a percentage point. Figures are the predicted quarterly average rates for the 30-year fixed-rate mortgage.

Will 2023 be a good time to buy a house? ›

Homebuyer.com data analysis indicates that, for first-time home buyers, June 2023 is a good time to buy a house relative to later in the year. This article provides an unbiased look at current mortgage rates, housing market conditions, and market sentiment.

How to get 900 credit score? ›

7 ways to achieve a perfect credit score
  1. Maintain a consistent payment history. ...
  2. Monitor your credit score regularly. ...
  3. Keep old accounts open and use them sporadically. ...
  4. Report your on-time rent and utility payments. ...
  5. Increase your credit limit when possible. ...
  6. Avoid maxing out your credit cards. ...
  7. Balance your credit utilization.
Feb 15, 2023

What is an extremely high credit score? ›

Exceptional Credit: 800 to 850. Very Good Credit: 740 to 799. Good Credit: 670 to 739. Fair Credit: 580 to 669.

What is an excellent FICO score? ›

Although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good; and 800 and up are considered excellent.

What to do immediately after closing on a house? ›

Make copies of all documents

The first thing to check off your new home to-do list after closing on your new house is to make copies of all your closing documents. Though your county's record clerk should have a copy, it's best to keep a copy for yourself as well. Store them in a fireproof safe or safe deposit box.

Do you tip anyone at closing? ›

While technically voluntary, not tipping the title closer is like not tipping a waitress in a restaurant and is considered inappropriate, barring extraordinary circumstances.

How many days after closing is first mortgage payment due? ›

When Is Your First Mortgage Payment Due After Closing? The first mortgage payment is typically due on the first of the month, one full month (30 days) after the closing date. Monthly mortgage installments are paid in arrears, meaning you'll be making payments for the month prior rather than the current month.

What is the 80% mortgage rule? ›

Even if you don't have a 20% down payment, you can avoid the cost of private mortgage insurance (PMI) with an 80-10-10 loan. You take out a primary mortgage for 80% of the purchase price and a second mortgage for another 10%, while making a 10% down payment.

What is the 80 20 rule in mortgages? ›

An 80/20 loan was a type of piggyback loan, which is a home loan that's split into two parts. It's called an 80/20 loan because the first part is a mortgage that covers 80% of the home purchase price. The second part is either a home equity loan or a home equity line of credit that covers the remaining 20%.

What is the 3 7 3 rule in mortgage? ›

Timing Requirements – The “3/7/3 Rule”

The initial Truth in Lending Statement must be delivered to the consumer within 3 business days of the receipt of the loan application by the lender. The TILA statement is presumed to be delivered to the consumer 3 business days after it is mailed.

How much house can I afford if I make $120000 a year? ›

If you make $50,000 a year, your total yearly housing costs should ideally be no more than $14,000, or $1,167 a month. If you make $120,000 a year, you can go up to $33,600 a year, or $2,800 a month—as long as your other debts don't push you beyond the 36 percent mark.

How much income do you need to buy a $650000 house? ›

To determine whether you can afford a $650,000 home you will need to consider the following 4 factors. Based on the current average for a down payment, and the current U.S. average interest rate on a 30-year fixed mortgage you would need to be earning $126,479 per year before taxes to be able to afford a $650,000 home.

How much house can I afford if I make $70,000 a year? ›

If you're an aspiring homeowner, you may be asking yourself, “I make $70,000 a year: how much house can I afford?” If you make $70K a year, you can likely afford a home between $290,000 and $360,000*. That's a monthly house payment between $2,000 and $2,500 a month, depending on your personal finances.

Will interest rates go down in 2023? ›

When it becomes more attractive to save money, consumers tend to spend less of it. But the Fed isn't done fighting inflation. And because of that, consumers should not expect interest rates to drop in 2023. However, rates may also not climb much from where they are today.

Is it better to go for a 2 year or 5 year fixed rate mortgage? ›

Is it better to have a 2 or 5-year fixed mortgage? 2-year fixed mortgages often benefit from a lower interest rate, but the 5-year fixed mortgage rates offer you more long-term financial stability, as you're locked into the fixed deal for longer.

What happens if you lock in a mortgage rate and the rate goes down? ›

When you lock your interest rate, you're protected from rate increases due to market conditions. If rates go down prior to your loan closing and you want to take advantage of a lower rate, you may be able to pay a fee and relock at the lower interest rate. This is called "repricing" your loan.

What is a new mortgage clause? ›

A mortgagee clause is found in many property insurance policies and provides protection for a mortgage lender if a property is damaged. While lenders do receive protections with the mortgagee clause, borrowers benefit as well from reimbursements for repairs to the home as well as any documented lost property.

What is the 2 rule for mortgage payment? ›

The 2% rule states that you should aim for a 2% lower interest rate in order to ensure that the savings generated by your new loan will offset the cost refinancing, provided you've lived in your home for two years and plan to stay for at least two more.

What is the new qualifying rate for mortgage? ›

Mortgage stress test changes

New mortgage stress test rules were introduced on June 1, 2021, that require all uninsured mortgages (where borrowers have a down payment of at least 20%) and insured mortgages (below 20% down payment) be approved at a higher qualifying rate of 5.25% or the contracted rate plus 2%.

What is the Isaoa clause? ›

ISAOA is an acronym found in mortgagee clauses that stands for “its successors and/or assigns.” It's included in the clause to stipulate that the mortgagee can transfer their rights to another bank or financial institution.

What is rocket mortgage clause? ›

The Bottom Line: A Mortgagee Clause Protects Your Property

If your property is damaged while you're paying off your mortgage, your insurance company will pay for the loss. As a mortgagor, you'll need to purchase a homeowners insurance policy as it's a lender requirement and is part of getting a mortgage.

What is the difference between remortgage and new mortgage? ›

A remortgage is basically a mortgage that you use to pay off a mortgage that you already have. The remortgage is a new mortgage on the same property as your current mortgage, the paying off of which leaves you with the new mortgage instead.

What is 40% rule for mortgage? ›

Maximum Monthly Debt Payment — The 40% Rule

Lenders review your financial status and usually do not grant a loan when all of your outstanding financial obligations exceed 40% of your monthly income. Before applying for the home loan, do some calculations to determine if you even qualify for the loan.

What is the 45% mortgage rule? ›

With the 35% / 45% model, your total monthly debt, including your mortgage payment, shouldn't be more than 35% of your pre-tax income, or 45% more than your after-tax income. To calculate how much you can afford with this model, determine your gross income before taxes and multiply it by 35%.

What is the 50% mortgage rule? ›

The 50% rule is a guideline used by real estate investors to estimate the profitability of a given rental unit. As the name suggests, the rule involves subtracting 50 percent of a property's monthly rental income when calculating its potential profits.

Is 2.25 percent a good mortgage rate? ›

Whether or not you qualify for 2.25%, rates are ridiculously low. The truth is, the lowest advertised rates almost always go to top-tier borrowers; those with excellent credit scores and 20% down payments. So a 2.25% mortgage rate will be out of reach for many.

What is the b20 qualifying rate? ›

Currently, Guideline B-20 establishes that the qualifying rate for uninsured mortgages (i.e., those with a down payment of greater than 20 percent) should be the greater of the mortgage contractual rate plus 200 basis points or the Bank of Canada five-year benchmark rate.

What 3 factors are considered in qualifying for a mortgage? ›

Let's begin by looking at the major factors lenders first consider when they decide whether you qualify for a mortgage. Your income, debt, credit score, assets and property type all play major roles in getting approved for a mortgage.


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