- A consortium of 34 financial officers across 27 U.S. states is calling for the reversal of a Federal Housing Finance Agency (FHFA) policy that would give borrowers with lower credit scores access to more favorable mortgage rates.
- Borrowers with high credit scores would incur a surcharge fee on loan-level price adjustments to offset the accrued risk, which financial officers have dubbed a quasi-tax on middle-class mortgage holders.
- Economists speculate that borrowers with a credit score of 680 would pay approximately $40 more per month on a $400,000 mortgage.
Florida Chief Financial Officer Jimmy Patronis on Monday joined a consortium of 33 additional financial officers spanning 27 states in a call to reverse a recently-enacted federal mortgage equity policy.
The Federal Housing Finance Agency (FHFA) recently adopted new policy regulations, effective May 1, that enable borrowers with lower credit scores and limited funds for down payments to access more favorable mortgage rates than they would have been eligible for under previous policy guidelines.
While the expanded eligibility criteria is intended to benefit financially disadvantaged borrowers, those with high credit scores will incur a surcharge fee on loan-level price adjustments to offset the accrued risk, which the collection of financial officers contends will serve as a quasi-tax on middle-class mortgage holders.
“It is already clear that this new policy will be a disaster. It amounts to a middle-class tax hike that will unfairly cost American families millions upon millions of dollars,” reads the letter to President Joe Biden and FHFA Director Sandra L. Thompson. “And — at a time when the real estate market has already slowed considerably due to high interest rates — it will further depress home sales. We urge you to take immediate action to end this unconscionable policy.”
Experts cited by Fox News state that under the policy borrowers with a credit score of 680 would pay approximately $40 more per month on a $400,000 mortgage. In total, the new fees increase costs to borrowers by 0.04 percent overall, according to FHFA.
Under the amended structure, a buyer with a 740 FICO credit score and a 15 percent to 20 percent down payment will face a 1 percent surcharge, according to a report published by the New York Post.
“Their plan to redistribute mortgage fees from those with good credit to those with poor credit … sounds like a way to hurl our economy into another housing crisis,” said Patronis. “I was in the Florida Legislature when the last sub-prime mortgage-induced recession hit our state and I don’t want Floridians to live through that again. I hope the Biden Administration will come to their senses and end this rule immediately before it causes irreparable financial damage to Floridians who are working every day to live the American Dream.”
Thompson, however, issued a statement late last month asserting that the updated borrowing framework remains in line with prior increases in mortgage eligibility.
“Higher-credit-score borrowers are not being charged more so that lower-credit-score borrowers can pay less,” she said. “The updated fees, as was true of the prior fees, generally increase as credit scores decrease for any given level of down payment.”