6 ms·

Fannie Mae New Rule: The Better Your Credit Score the Higher Your Mortgage Rate

27 points by kolanos 3y ago

rolph 3y ago
how soon is this going to be gamed using a strawman purchaser, to hold mortgage? you get a low rate, they get a bump in credit rating. it seems like it would be quite illegal, but a temptation nonetheless.
- floren 3y ago
  It would also be very stupid, because someone with bad credit still gets a worse rate than someone with good credit -- it's just that the difference isn't quite as big as it used to be.
oh_my_goodness 3y ago
After a quick look at the tables, it looks like the HN title may be opposite the trend at the link.
- kolanos 3y ago
  Here is a normalized chart to show the rate increases [0]. [0]: https://mishtalk.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_1024/MTk3NDExMjAwNDkxODU2OTAy/loan-level-price-adjustment-matrix-changes-may-1.webp https://mishtalk.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%...
kgermino 3y ago
I don’t see a single chart in this file that shows a higher interest rate for higher credit scores, it’s always lower for higher scores. Am I misreading it? Otherwise this seems like misinformation
- orbz 3y ago
  Yeah, it’s a wildly misleading title.
- kolanos 3y ago
  I could not fit "Increase" into the end of the HN title. Here is a normalized chart of the rate increases [0]. [0]: https://mishtalk.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_1024/MTk3NDExMjAwNDkxODU2OTAy/loan-level-price-adjustment-matrix-changes-may-1.webp https://mishtalk.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%...
baggy_trough 3y ago
Yet another outrageously unfair and destructive rule from the Biden administration. Very disappointing.
- readthenotes1 3y ago
  But think of how unfairly people with bad credit have been paying more to cover the losses caused by other people with bad credit keeping true to their lived experience of not paying their debts? (Yes, I know that people with bad credit have many reasons for defaulting, however, they have many reasons for defaulting.)
glofish 3y ago
I am trying to read the numbers but not sure I can validate whether the title is true or not. The post is going to be great in figuring out who is reading the content and who is just "reacting"
evancox100 3y ago
The current headline, “The Better Your Credit Score the Higher Your Mortgage Rate” is not true. The LLPA (Loan Level Price Adjustment, the amount Fannie Mae charges essentially) decreases monotonically with increasing credit score. So higher credit score borrowers will still pay less than lower credit score borrowers. From [1]: "'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." What they have done is significantly lowered the spread between high- and low-credit score borrower, by increasing the fee charged to the former and decreasing the fee charged to the latter. [1] https://reason.com/2023/04/21/borrowers-with-high-credit-scores-penalized-under-new-federal-mortgage-fee-plan/ https://reason.com/2023/04/21/borrowers-with-high-credit-sco...
- ajhurliman 3y ago
  So now that the affordability range for mid-and-high-tier earners is depressed, they’ll be encouraged to buy cheaper houses, thus increasing demand for the lower-end market and making it even more difficult for those with poor credit to buy a house.
- kgwgk 3y ago
  "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." The submission title should be "Fannie Mae New Rule: The Better Your Credit Score the Higher __the increase in__ Your Mortgage Rate"
  - kolanos 3y ago
    HN limits submission titles. I couldn't fit "Increase " into the end of the title. But if @dang wants to make the title more clear then I'd welcome that.
- deleted 3y ago
  [deleted]
- frankfrankfrank 3y ago
  So it’s really an issue of imprecise title, but the issue is still highly immoral and likely illegal based on the taking clause and the highly discriminatory and unequal nature, regardless. The title should have been more like about how the fees, i.e., marginal rates, for higher risk borrowers is being charged to lower risk borrowers. No moral or ethical person could support this, regardless of benefit of penalty. It is indefensible, short of making it voluntary so all the virtue signalers can choose to put their money where their mouth and self-righteousness it. It is still a system to punish good and reward bad.
rufius 3y ago
So I read the linked document twice and I am failing to see how the content matches title. Granted I don't spend much time looking at these documents, but am I missing something?
frankfrankfrank 3y ago
Can someone explain where I should be seeing the increased rates for higher credit scores? I don’t even think that is the correct loan guidance, it’s the pre-May rate terms. The post May rates are at a link at the top right of the sheet.
anigbrowl 3y ago
Headline appears to be a lie and states the opposite of the supplied data (on page 2).
iwanttocomment 3y ago
Huh? It's the exact opposite. Even with the recent changes, those with higher (better) credit scores will be given a lower price adjustment percentage, resulting in lower rates for those with better credit. The headline is wildly incorrect.
floren 3y ago
The link here is to the old matrix. The new one, linked in the red text at the top of https://singlefamily.fanniemae.com/media/9391/display https://singlefamily.fanniemae.com/media/9391/display, actually shows the changes in question. As others have said, it's not that somebody with a 650 score pays less than someone with 800... it's just that the rate for people with low scores isn't as bad as it used to be, and the rate for people with high scores isn't as good as it used to be.
bcrosby95 3y ago
This is the upfront fee you pay for the mortgage. Many people opt to pay it over time. High credit score people still pay less. To be honest, I'm not sure why credit rating should affect this fee. Those with a low credit rating already pay more in interest.
- frankfrankfrank 3y ago
  You’re surfacing a whole different issue, the legitimacy and fraud of the whole credit score system, produced by organizations who have a clear and documented history of fraud. See, housing “bubble”, aka fraud, for reference.
danielecook 3y ago
A false narrative is being pushed here. All conservative outlets are carrying this story without providing any detail or nuance.
- christophilus 3y ago
  Ah. Nuance. I remember experiencing that once.
hackeraccount 3y ago
I want to hear a defense of this or an explanation of it that doesn't start with, "People with a better credit score actually get a lower rate." Yes, I understand that. I don't understand why you would use people with good credit as a source for helping people with bad credit.

27 points by kolanos 3y ago

how soon is this going to be gamed using a strawman purchaser, to hold mortgage? you get a low rate, they get a bump in credit rating. it seems like it would be quite illegal, but a temptation nonetheless.

floren 3y ago
It would also be very stupid, because someone with bad credit still gets a worse rate than someone with good credit -- it's just that the difference isn't quite as big as it used to be.

oh_my_goodness 3y ago

After a quick look at the tables, it looks like the HN title may be opposite the trend at the link.

kolanos 3y ago
Here is a normalized chart to show the rate increases [0]. [0]: https://mishtalk.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_1024/MTk3NDExMjAwNDkxODU2OTAy/loan-level-price-adjustment-matrix-changes-may-1.webp https://mishtalk.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%...

kgermino 3y ago

I don’t see a single chart in this file that shows a higher interest rate for higher credit scores, it’s always lower for higher scores. Am I misreading it? Otherwise this seems like misinformation

orbz 3y ago
Yeah, it’s a wildly misleading title.
kolanos 3y ago
I could not fit "Increase" into the end of the HN title. Here is a normalized chart of the rate increases [0]. [0]: https://mishtalk.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%2Cw_1024/MTk3NDExMjAwNDkxODU2OTAy/loan-level-price-adjustment-matrix-changes-may-1.webp https://mishtalk.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%...

baggy_trough 3y ago

Yet another outrageously unfair and destructive rule from the Biden administration. Very disappointing.

readthenotes1 3y ago
But think of how unfairly people with bad credit have been paying more to cover the losses caused by other people with bad credit keeping true to their lived experience of not paying their debts? (Yes, I know that people with bad credit have many reasons for defaulting, however, they have many reasons for defaulting.)

glofish 3y ago

I am trying to read the numbers but not sure I can validate whether the title is true or not. The post is going to be great in figuring out who is reading the content and who is just "reacting"

evancox100 3y ago

The current headline, “The Better Your Credit Score the Higher Your Mortgage Rate” is not true. The LLPA (Loan Level Price Adjustment, the amount Fannie Mae charges essentially) decreases monotonically with increasing credit score. So higher credit score borrowers will still pay less than lower credit score borrowers. From [1]: "'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." What they have done is significantly lowered the spread between high- and low-credit score borrower, by increasing the fee charged to the former and decreasing the fee charged to the latter. [1] https://reason.com/2023/04/21/borrowers-with-high-credit-scores-penalized-under-new-federal-mortgage-fee-plan/ https://reason.com/2023/04/21/borrowers-with-high-credit-sco...

ajhurliman 3y ago
So now that the affordability range for mid-and-high-tier earners is depressed, they’ll be encouraged to buy cheaper houses, thus increasing demand for the lower-end market and making it even more difficult for those with poor credit to buy a house.
kgwgk 3y ago
"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." The submission title should be "Fannie Mae New Rule: The Better Your Credit Score the Higher __the increase in__ Your Mortgage Rate"
- kolanos 3y ago
  HN limits submission titles. I couldn't fit "Increase " into the end of the title. But if @dang wants to make the title more clear then I'd welcome that.
deleted 3y ago
[deleted]
frankfrankfrank 3y ago
So it’s really an issue of imprecise title, but the issue is still highly immoral and likely illegal based on the taking clause and the highly discriminatory and unequal nature, regardless. The title should have been more like about how the fees, i.e., marginal rates, for higher risk borrowers is being charged to lower risk borrowers. No moral or ethical person could support this, regardless of benefit of penalty. It is indefensible, short of making it voluntary so all the virtue signalers can choose to put their money where their mouth and self-righteousness it. It is still a system to punish good and reward bad.

rufius 3y ago

So I read the linked document twice and I am failing to see how the content matches title. Granted I don't spend much time looking at these documents, but am I missing something?

frankfrankfrank 3y ago

Can someone explain where I should be seeing the increased rates for higher credit scores? I don’t even think that is the correct loan guidance, it’s the pre-May rate terms. The post May rates are at a link at the top right of the sheet.

anigbrowl 3y ago

Headline appears to be a lie and states the opposite of the supplied data (on page 2).

iwanttocomment 3y ago

Huh? It's the exact opposite. Even with the recent changes, those with higher (better) credit scores will be given a lower price adjustment percentage, resulting in lower rates for those with better credit. The headline is wildly incorrect.

floren 3y ago

The link here is to the old matrix. The new one, linked in the red text at the top of https://singlefamily.fanniemae.com/media/9391/display https://singlefamily.fanniemae.com/media/9391/display, actually shows the changes in question. As others have said, it's not that somebody with a 650 score pays less than someone with 800... it's just that the rate for people with low scores isn't as bad as it used to be, and the rate for people with high scores isn't as good as it used to be.

bcrosby95 3y ago

This is the upfront fee you pay for the mortgage. Many people opt to pay it over time. High credit score people still pay less. To be honest, I'm not sure why credit rating should affect this fee. Those with a low credit rating already pay more in interest.

frankfrankfrank 3y ago
You’re surfacing a whole different issue, the legitimacy and fraud of the whole credit score system, produced by organizations who have a clear and documented history of fraud. See, housing “bubble”, aka fraud, for reference.

danielecook 3y ago

A false narrative is being pushed here. All conservative outlets are carrying this story without providing any detail or nuance.

christophilus 3y ago
Ah. Nuance. I remember experiencing that once.

hackeraccount 3y ago

I want to hear a defense of this or an explanation of it that doesn't start with, "People with a better credit score actually get a lower rate." Yes, I understand that. I don't understand why you would use people with good credit as a source for helping people with bad credit.