Earlier this week, the Federal Housing Finance Agency’s overhaul of a little-known mortgage fee, the loan level price adjustment, went into effect leading to consternation and confusion among some lenders, real estate agents and prospective home buyers.
The overhaul had some media provocateurs pushing a narrative that suggests home buyers with good credit will pay higher mortgage rates than those with lousy credit. Some stories suggested folks should intentionally tank their credit score to secure a better mortgage rate.
You should keep paying your bills and don’t panic, Kristen Zorda, mortgage lender with Evolve Bank & Trust, said.
“There has been a lot of miscommunication happening with these changes that just came out,” Zorda said. “I’ve locked in a few mortgages this week and there haven’t been any significant changes in the sense that people with good credit are being penalized more than people with bad credit. That is simply not the case.”
Fannie Mae and Freddie Mac, the two government-sponsored enterprises that back about two-thirds of all mortgages that originate with lenders in the United States, routinely make changes. Rarely do they garner as much buzz as this most recent modification meant to promote affordable home ownership.
The changes that went into effect May 1 involve a loan level price adjustment, a risk-based fee lenders apply to conventional mortgages based on a matrix of factors, such as the size of a down payment, credit score, type of home and debt-to-income ratio. The fee helps lenders manage risk, weighing down payment and credit score most heavily. The recent adjustment has no bearing on mortgages backed by the Federal Housing Administration, Department of Veterans Affairs or U.S. Department of Agriculture.
The new ruling reduces LLPAs for buyers with lower credit scores and lower down…
Read the full article here
Leave a Reply