BOSTON — Impending changes to federal rules on mortgage fees will mean high credit scores no longer make for better mortgage rates.
“Is it fair? I don’t necessarily think of it as being fair,” Virna Brown said of the change, which takes effect May 1.
Brown is a mortgage loan officer with Envoy Mortgage in Franklin, Massachusetts. She says the industry has been gearing up for changes to federal rules on mortgage fees that will offer discounted rates for some home buyers with riskier credit.
“They’re redistributing the wealth if you will amongst the many to try and even the playing field for all the borrowers,” Brown said.
In less than two weeks mortgage fees on home loans backed by Freddie Mac and Fannie Mae for people with poor credit will become significantly lower while the fees jump up for buyers with good credit.
The former CEO of the Mortgage Bankers Association, David Stevens, says this essentially subsidizes those with risky credit.
”It’s a bad policy step. It lacks integrity, um, and that’s not how we should be making housing policy right now... It should not include tinkering by a regulator for their own, you know, social or political purposes at a time like this,” Stevens said.
For example, a person with a 620 FICO score and a down payment of 5% gets a one and three-quarter fee discount on a 30-year mortgage. But a person with a FICO score of 740 or above, with 15%-20% down, will see an increase of 75% in fees from the current levels.
And this applies to people of all income levels.
“If you have a high credit score and 680′s a good credit score, you have to pay more and we’re talking about real money. This could be a hundred dollars a month more, uh, depending on the size of your loan, so, it makes no sense,” Mitch Roschelle, Madison Ventures & Managing Director said.
This is part of the Biden Administration’s push for affordable housing a White House spokesperson said first-time home buyers will really benefit from this.
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