Biden Raises Costs for Homebuyers With Good Credit to Help Risky Borrowers

NEWS WEEK ARTICLE:

Homebuyers with good credit scores will soon be facing higher mortgage fees as the Biden administration seeks to close the racial homeownership gap and get more first-time and low-income buyers through the door.

A new federal rule could raise the monthly mortgage payments of buyers with good credit scores by over $60 a month, while riskier borrowers will get more favorable terms because their fees will be reduced.

Starting in May, the current structure of the Loan-Level Price Adjustment (LLPA) matrix will be upended by the Federal Housing Finance Agency (FHFA) in the hope of addressing housing affordability challenges in the U.S.

But there have been complaints that the rule change is unfair and potentially ineffective.

"In the short term, this may increase homeownership among the targeted group, but I'm afraid it could decrease homeownership among the middle class," Jerry Howard, CEO of the National Association of Home Builders, told Newsweek. "I'm not sure that we're not robbing Peter to pay Paul here."

Only about 25 percent of homebuyers with Federal Housing Administration loans are people of color, according to the White House. Black and Hispanic people, on average, have fewer savings to use as a down payment on a home and tend to have lower credit scores, according to David Stevens, former CEO of the Mortgage Bankers Association (MBA) and a former FHA commissioner during the Obama administration. The current policy is being rolled out by the FHFA.