As Fox News explains, consumers with lower credit ratings – and less money for a down payment – would qualify for better mortgage rates than they otherwise would have. Joel Griffith, an economist for The Heritage Foundation, calls this a slap in the face to people who have worked hard to have good credit.
"Right now, if you go looking to get a mortgage, depending on what your FICO [credit score] is, you will have a fee added in, basically to protect the lender against loss," Griffith explains to AFN. "Well, under this proposal, if you have a credit score of 680 to 780, which is pretty good for FICO, the surcharge that you're going to pay is actually going to jump from about 0.25% of your total mortgage balance to around 1%. It's going to quadruple."
For example, says the Heritage spokesman, individuals with good credit who are looking to get a $400,000 mortgage will pay an up-front surcharge of approximately $3,200 – which will be added into the mortgage payment. That payment would go up by $40/month on a $400,000 home.
At the same time, Griffith says, the Biden administration is going to lower that surcharge for those who have poor credit.
"They are going to drop that rate by 1.75%," he exclaims. "This is really backwards: You have great credit [but] you're going to see your insurance quadruple; and if you have poor credit, you're going to see your payment substantially decrease. This is typical wealth distribution, where you take from those who have and give to those who don't."
Sandra Thompson, director of the Federal Housing Finance Agency, stands by the rules. Fox News quotes Thompson as saying this is designed to "increase pricing support for purchase borrowers limited by income or by wealth" and comes with "minimal" fee changes.