Yes, you read the headline correctly. If you are a home buyer with great credit, a new federal law that will take effect on MAY 1, 2023, has new fees attached to your mortgage. Fees that will help subsidize risky buyers with bad credit.

A little-noticed revamp of federal rules on mortgage fees will offer discounted rates for home buyers with riskier credit backgrounds — and force higher-credit homebuyers to foot the bill, The Post has learned.

Fannie Mae and Freddie Mac will enact changes to fees known as loan-level price adjustments (LLPAs) on May 1 that will affect mortgages originating at private banks nationwide, from Wells Fargo to JPMorgan Chase, effectively tweaking interest rates paid by the vast majority of homebuyers.

Oh yeah, this REALLY slipped under everyone’s radar. And the devil is definitely in the details. Home buyers who have great credit scores will see an additional fee leveraged on their mortgage, while riskier buyers with bad credit or even NO credit will get fabulous discounts! 

Specifically those with high credit scores who pay 15-20% down will get slammed with the highest rate plus a 1% surcharge. What does this mean for a mortgage when a home is purchased with good credit? 

“When absorbed into a long-term mortgage rate, the increase is the equivalent of slightly less than a quarter percentage point in mortgage rate,” the Post reported in reference to buyers with higher credit ratings. “On a $400,000 loan with a 6 percent mortgage rate, that buyer could expect their monthly payment to rise by about $40.”

That’s nearly $14,400 over the life of a traditional 30-year mortgage.

You can damned well bet the Biden Administration will spin this as a ‘it’s only a quarter percent fee charged’ thus implying it’s no big deal. Except $14,000 over the life of the mortgage IS a big deal as that is money that could’ve been used elsewhere such as paying down the principle, home repairs or put into savings!

All of this is in the name of being “fair” and “equitable.” You see, those with risky or just plain bad credit will benefit from all this fairness. 

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.

That’s a helluva discount and bennie for having bad credit! What’s incredibly egregious about this is not only are buyers with good credit penalized, it also will have a detrimental affect on the home buying industry. Not only that, but we’ve ALL been through this before and watched while the market took a serious dive in 2008 and onward! 

Risk Sharing:
You work hard to get good credit so you can get a good mortgage, and 'share' that hard work with someone who didn't so they can get a better rate than you.
Are you paying attention? pic.twitter.com/mAUTKyUjGR

— Frog Capital (@FrogNews) April 20, 2023

This is absolutely indefensible, which tells me the Brave Firefighters of the national press will be assuring us soon that it's not actually a thing, followed by, it's a thing and it's good, and then by, it's a good thing and you're fascist for noticing. https://t.co/UTbdUW1hdy pic.twitter.com/nQUtdJOM86

— Will Collier (@willcollier) April 20, 2023

Exactly! I mean we were assured that the gas stove ban was all in our imagination until it wasn’t! 

Keep in mind, rates are now hovering around 6%. A rate that has steadily increased since Joe Biden took office. This is supposedly the fabulous new “normal” we are all excited to live with!

But now that news of these new fees that penalize folks with good credit is circulating, how with the housing market react over the next couple of weeks? Oh I’d say it’s gonna get a little sporty around the country. 

“It’s going to be a challenge,” one loan originator told the Post, “trying to explain to somebody that says, ‘I worked my whole life for high credit and I’ve put a lot of money down and you’re telling me that’s a negative now?’ That’s a hard conversation to have.”

David Stevens, who served as Federal Housing Administration commissioner during the Obama administration, told the Post that the administration’s proposal is “unprecedented. My email is full from mortgage companies and CEOs (telling) me how unbelievably shocked they are by this move.”

Americans with strong financial positions are being punished for being fiscally responsible! 

What could possibly go wrong with this? Oh just history repeating itself as many with bad credit will be incentivized to get into a home but NOT save and work to repair their bad credit, just as what happened in 2008. And it took YEARS for the market to recover then! 

Meanwhile home buyers with good credit who were considering buying a new home may take a step back on this news, which does the home sales industry no good, and will create another mortgage crisis.

Furthermore, do the banks want to get back into the business of carrying untenable debt load as happened in the past? 

Just as with the student loan debt push by Biden, this move has people with great credit subsidizing those who realistically cannot afford to purchase a home.

Again, what could possibly go wrong with this socialist scheme?

Feature Photo Credit: Home for Sale/Sold photo via iStock, cropped and modified