The new requirements that borrowers with 740 + Ficos and even 780+ Ficos scores may be required to pay more money to get their new mortgage is heating up. And this has been all over the news for the last week as the changes go into effect May 1stofficially. However, we as lenders started charging these extra fees as early as March as for us to avoid these extra fees the loan must be delivered and sold to Fannie or Freddie by this Friday and this usually takes 2-4 weeks at a minimum after closing. Thus, most loans that are closing in April are already experiencing these extra charge.
How much? It varies based on their Fico scores and down payment. The extra cost is typically 25 bps to 50 bps and on a $500k loan that’s an extra costs of $1250 to $2500 that the borrower will have to pay at closing or pay by way of a higher rate.
Why is this happening? FHFA, the agency that oversees Fannie and Freddie, is using this extra money to help more low-income buyers and more FTHBs get more affordable financing. In essence, Fannie and Freddie are now “taxing” borrowers with higher incomes, higher Fico scores, and larger down payments as Fannie and Freddie are now playing “Robin Hood” with peoples’ money by “taking from the rich” to “give to the poor”. It’s socialism in essence or redistribution of wealth that only the government can do.
For example a borrower putting 5% down with a 680 Fico used to pay a discount point of 1.25% or $6,250 extra on a $500k loan. Today, they won’t have to pay this extra fee if their income is < $94,290 and thus qualify for a HomeReady or HomePossible loan. And this can be a repeat homebuyer, not just FTHBs. But, here in metro Denver FTHBs with income < $141,360 can qualify for this discount too.