Homebuyers with good credit scores will be forced to pay for high-risk loans to people with low credit scores.
According to the Washington Times, the Biden administration will force homebuyers with good credit scores to pay a higher fee in order to subsidize loans to those with poor credit.
Under Biden’s new rule, those with lower credit scores and smaller down payments will qualify for better mortgage rates.
The fee will go into effect on May 1st. It will affect homebuyers with credit scores of 680 or higher, on a home loan of $400,000 or more. Homebuyers who can afford to make down payments of 15% – 20% will be hit with the largest fees.
RELATED: Biden moving HUD housing to the suburbs
The news comes months after the Biden administration announced it will move HUD housing residents to the suburbs.
The new rule is part of that effort to make it easier for people with low credit scores to afford housing in the suburbs.
Homebuyers with good credit scores are furious. They say the higher fees are unfair and penalizes those who work hard to maintain their creditworthiness.
“The changes do not make sense. Penalizing borrowers with larger down payments and credit scores will not go over well,” said Ian Wright, a senior loan officer at Bay Equity Home Loans in the San Francisco Bay Area. “It overcomplicates things for consumers during a process that can already feel overwhelming… Confusing the borrower is never a good thing,” he said in a statement to the Washington Times via email.
“I am all for the first-time buyer having a chance to get into the market, but it’s clear these decisions aren’t being made by folks that understand the entire mortgage process,” Wright said.
The Federal Reserve interest rate hikes have increased mortgage rates above 6% in recent months.
Mortgage applications from homebuyers dropped 10% in April.
