Special offer
Bruce Walter (Keller Williams Realty Lafayette/West Lafayette, Indiana)

Spam prevention
Ambassador
3,344,906
Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate Services

Leanne Smith post from yesterday may help - be sure to see the comments that provide more links. Feds Strike Again

Update: I forgot - you asked for my thoughts:  Total. Complete. Political. Woke. Equity. Inclusion. Bull Crap!  💩💩💩💩💩💩💩

Punishment for hard-working people who love God and this Country! 

Kevin O'Leary discussed this a few nights ago - I believe his words were stupid and irresponsible. Now that is fitting. He sees another 2008 and says the "leaders" do not learn from their past mistakes.  

Apr 21, 2023 07:14 AM
Rainmaker
1,052,056
Candice A. Donofrio
Next Wave RE Investments LLC Bullhead City AZ Commercial RE Broker - Fort Mohave, AZ
928-201-4BHC (4242) call/text

[the higher the credit score and down payment the higher the monthly fee that will be added to the loan that will subsidize a lower interest rate for borrowers with lower credit scores]

I haven't been paying attention, but if this is true it is the biggest bunch of complete and utter bullshit. Why should responsible people pay for irresponsible people? Rhetorical. I'm done LOL

Hopefully someone will deconstruct this to where it makes sense.

Apr 21, 2023 06:37 AM
Rainer
417,071
Caroline Gerardo
Licensed in 20 states - Newport Beach, CA
C. G. Barbeau the Loan Lady nmls 324982

Mine government decided that based on studies like this

https://www.federalreserve.gov/econres/notes/feds-notes/are-income-and-credit-scores-highly-correlated-20180813.html

And others

That people with high FICO scores have an unfair advantage in government backed loans. Someone with a 780 FICO has easier access to loans. They also determined that having perfect credit correlates with higher income. 

This is the chicken or the egg?

Having a high paying W-2 job could make it easy to pay your bills on time 

or

Having perfect credit gets you the high paying job when employer does a background check?

So

In order to level the playing field they added or changed Loan Level Pricing Adjustments (LLPA). LLPA are all the ins and outs that a lender reviews to tell a borrower what rate they get: a cash out refinance, higher loan to value, condo, non owner occupied for example has higher bits of pricing adds than a purchase with lower loan to value on a single family owner occupied. Each of the pieces of information determine the risks of default based on historic calculations of past loans gone bad.

This new concept will cost the perfect credit customer .125%- .25% more in fees (fees go into the mortgage rate) than the middle to lower credit customer. 

A borrower might never know the difference. It's a way to bump up the lower end deals to be able to qualify and close. 

The difference is tiny but in the overall ocean it will allow more lower FICO borrowers to be able to close.

Here is Fannie Mae's chart of pricing adjustments as they will change.

I know this is lots of numbers and only I love numbers but it gives you the nitty gritty of how this "deal" is supposed to help the lower end deals.

https://reason.com/wp-content/uploads/2023/04/LLPA-Matrix-updated-03-22-23.pdf  

Feel free to ask me questions or call me to explain.

It isn't "fair" but there is an argument that credit reporting isn't fair. I agree that FICO or Vantage can be manipulated. Scores can be improved if a person has enough knowledge, access, and help. 

The tide of our current administration is to find ways to use Federal money for the lower end. Lower end I mean - lower score, lower income, smaller deals. We are all paid commission on the transaction amount. The Fed can't legally give bonuses to lenders for doing more deals for low to moderate income or Americans who often have little access to buying a home.

Every loan we do is tracked by: FICO, income, location, borrower ethnic/race etc and the numbers show that those with higher FICO in higher cost areas get more Fannie and Freddie loans.

This LLPA is not yet added to USDA and VA but I expect that's the next wave after the administration waits to see if Congresspeople or Senators start yelling and screaming.

I firmly believe the system is rigged towards lenders closing the cream of the crop. A w-2 high wage earner with high FICO who knows how to use technology gets a better deal and is easier to deal with so lenders have a bias not to do the "hard ones" that require more time and work.  This is human nature and the system we have which is capitalism. 

This experiment was tried in the past. It would not be the way I would organize or provide incentive for all of us to do more small hard deals.

I proudly serve on several MBA committees namely the MBA Legal. Working on a proposal now.

This does not change Jumbo loans.

Multifamily loans also got a perk like this (units more than 5).

Apr 21, 2023 07:59 AM
Ambassador
1,076,531
John Meussner
Mortgages in AZ, CA, CO, DE, FL, GA, IN, MD, MN, MT, NC, NJ, NV, OK, OR, PA, SC, SD, TN, TX, UT, VA, WI - Fair Oaks, CA
#MortgageMadeEasy Fair Oaks, CA 484-680-4852

I can't sugarcoat my opinion on this - it's absolute horseshit that people with excellent credit and savings for a down payment are seeing their lending options become more expensive, especially considering it's only the middle class that's taking the hit.  Wealthy borrowers and their private equity lending options will still see lower rate offerings, while Fannie Mae & Freddie Mac continue to gouge and pillage the middle class while screaming "EQUITY!!!!!!!" from the rooftops.  

This can't be about access to home ownership, because there are already myriad down payment assistance products that offer little- to no-money-down loans for homebuyers with low income.  Hell, USDA has a product that offers 0% down loans to anyone with average to below average income and the loan covers most of the USA outside of major metros.

Lending should be based on risk - the higher the risk, the higher the cost, and the lower the risk, the lower the cost.  This flips the entire concept of sound lending on it's head.  I only hope it gets people angry enough to the point where they reach out to their representatives, because that's the only way this stuff changes.  And STOP voting for people who want to help one class by hurting another class....it doesn't work, and just brings everyone down.

Apr 21, 2023 11:20 AM
Rainmaker
634,431
Jason E. Gordon
CMG Mortgage, San Diego, CA - San Diego, CA
Sr Loan Officer, CMA, CMPS, CDLP, CDRE, RCSD, CDPE

The graphs below represent Loan Level Pricing Adjustments (LLPA's).  LLPA's add to the base pricing (LLPA's make the rate quotes worse). Therefore, a higher number in the grid below, the WORSE the pricing impact is.  While "good credit" borrowers still pay less than "bad credit" borrowers (a misnomer that is carelessly flooding social media), the proposed CHANGES are negatively impacting "good credit" while positively impacting "bad credit".  Just a couple examples below...in yellow, LLPA's got worse for higher FICO's, while in green, LLPA's got better for the lower FICO's.

Also worth noting is that Debt-to-Income (DTI) Ratios will now impact pricing (there was previously no LLPA's for DTI Ratios). This revision in itself will be incredibly problematic (as most of our loans nowadays exceed a 40% DTI).  Very sneaky move here by Fannie/Freddie, which none of us are happy with:

Apr 21, 2023 10:17 AM
Rainmaker
5,104,806
Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

I heard yesterday that the implementation date was pushed to August 1st. That gives us time to get after out representatives. It's Fannie Mae and Freddie Mac loans as I understand it and anyone with a credit score above 680 will be paying more.

Apr 21, 2023 07:23 AM
Rainmaker
2,890,372
Patricia Feager, MBA, CRS, GRI,MRP
DFW FINE PROPERTIES - Flower Mound, TX
Selling Homes Changing Lives

Bruce Walter - I invite John Meussner to provide anwers and explanations to this question that is truly mind- boggling and insane. 

Apr 21, 2023 08:04 AM
Ambassador
4,691,993
Brian England
Ambrose Realty Management LLC - Gilbert, AZ
MBA, GRI, REALTOR® Real Estate in East Valley AZ

We have some amazing lenders in the Rain, I look forward to hearing what they have to say about it.

Apr 21, 2023 06:46 AM
Rainmaker
2,781,013
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

Yes to getting quality input & feedback for this subject. Let's see Bruce Walter 

Apr 21, 2023 06:04 AM
Ambassador
3,587,835
Anna "Banana" Kruchten
HomeSmart Real Estate - Phoenix, AZ
602-380-4886

Eileen Burns please do set up a zoom call with John Meussner . His post today is excellent and he makes it very easy for all to understand.

https://activerain.com/droplet/HshK

 

 

Apr 21, 2023 11:32 AM
Rainmaker
1,502,848
Ryan Huggins - Thousand Oaks, CA
https://HugginsHomes.com - Thousand Oaks, CA
Residential Real Estate and Investment Properties

This is one of the most f'd up things to come out of that pretender's office yet.

https://m.washingtontimes.com/news/2023/apr/18/joe-biden-hike-payments-good-credit-homebuyers-sub/

 

People who are responsible, who pay their bills on time, who work hard to get a good credit score are now going to get the shaft so that people who can't manage their credit can get a bonus.  This is pure "Robin Hooding" by stealing from those who care and giving it to those that don't.

 

This has nothing to do with "equity" or "fairness" and EVERYTHING to do with punishing responsible people and promoting irresponsibility and government handouts.  I for one will not be taking out any mortgages or refinancing until this is repealed and will be encouraging all responsible parties with high credit scores to do the same.

Apr 21, 2023 09:40 AM
Rainmaker
900,008
Olga Simoncelli
Veritas Prime, LLC dba Veritas Prime Real Estate - New Fairfield, CT
CONSULTANT, Real Estate Services & Risk Management

There seems to be some misinterpretation here. Thank you Caroline Gerardo for providing the links to original information. If you read to the end of the bulletin, you will see that in the conclusion it states that there is very little correlation between higher income and better credit scores. The new fees that are contemplated are rather aimed at those who take out mortgages with very low downpayments. Those borrowers tend to be either investors/flippers (using the banks' money to buy, then pay down after reselling for a profit) or those who can't afford a higher downpayment (default risk). Those loans are not desirable for the mortgage securitization programs (e.g. Fannie Mae) as they tend to be shorter term and need to be pulled out of the securitization package when they are paid down or if there are skipped payments on them. If you look at the fee schedules, "rich people" who put 20-30% down (thus staying less leveraged or overextended financially) are NOT penalized with the additional fees that are proposed. These loans are not "government backed", they are purchased from banks, giving banks more capital to make more loans. Banks have the option of keeping the loans on their books (non purchase loans) so if you're working with a small bank or credit union that does not sell its loans, none of the fees apply. This is NOT an attack on the wealthy, it is Fannie Mae's attempt to keep securitized loans in their portfolios longer, to avoid too many early prepayments or defaults.

 

Apr 22, 2023 12:03 PM
Rainmaker
1,622,432
Inna Ivchenko
Barcode Properties - Encino, CA
Realtor® • GRI • HAFA • PSC Calabasas CA

Bruce, the excellent question and great comments. 

P.S. I did not hear about this one ~ what a genius solution some gov morons brought. Wow! 

I do follow all major recent scams in economy, but seems the creativity of some minds on how to separate others from their funds never sleeps. 

Apr 22, 2023 01:03 AM
Rainer
465,298
David M. Dwares
Title Professionals Corp. - Fort Lauderdale, FL
Title guy with a broker license

This is a brief (attempt) at explanation and a Q&A I found on the Experian website.

It looks like Cash Out refis are going to be affected the most.

Apr 21, 2023 10:19 AM
Rainmaker
820,578
Eileen Burns 954.483.3912
Trans State Commercial Realty Inc. - Fort Lauderdale, FL
FLorida Real Estate Connector

Bruce Walter I am tagging William Piotrowski to make this his topic for the weekly  Zoom all May 9th 2pm eastern. Please let me know ASAP William 

Watch for the George Souto blog, Kathleen Daniels, Probate & Trust Specialist Monday Q/A and Saturday blog by Carol Williams 

Apr 21, 2023 10:17 AM
Rainmaker
938,407
Bruce Walter
Keller Williams Realty Lafayette/West Lafayette, Indiana - West Lafayette, IN

Caroline, thanks so much for taking the time to explain this all to us.  It will take me some time to digest all the info in the links, providing I am able to understand it.

Apr 21, 2023 08:17 AM
Rainmaker
2,390,010
Bob "RealMan" Timm
Ward County Notary Services - Minot, ND
Owner of Ward Co Notary Services retired RE Broker

What an interesting question Bruce Walter . The government loves to penalize the achievers and give the money to the under achievers.

Apr 21, 2023 08:17 AM
Ambassador
6,392,879
Bob Crane
Woodland Management Service / Woodland Real Estate, KW Diversified - Stevens Point, WI
Forestland Experts! 715-204-9671

A tiny tiny difference, rather than charging extra fees for these borrowers they should just deny them and save the govt backed loans for those who need them the most, which I believe was the purpose for many of these govt lenders to start with.

Apr 21, 2023 08:13 AM
Rainmaker
901,187
Carla Freund
Keller Williams Preferred Realty - Raleigh, NC
NC Real Estate Transition & Relocation 919-602-848

I guess I've been so busy that I didn't hear about this. I'll have to research it but it seems unconstitutional. I worked in banking before credit scores and our bank was one that tested credit scores to help create them. Now they're being used against people who pay their bills. Shame Shame!

Apr 22, 2023 05:40 AM
Ambassador
5,228,997
Debe Maxwell, CRS
Savvy + Company (704) 491-3310 - Charlotte, NC
The RIGHT CHARLOTTE REALTOR!

I have coined a new phrase in honor of this complete and total BS...

Mortgage Welfare!

When, oh when will we stop taking from the responsible and giving to the irresponsible?

 

Apr 23, 2023 08:48 AM