Mortgage Bankers Association President and CEO Bob Broeksmit decried the glut of “misinformation” surrounding the changes in the Loan Level Price Adjustments (LLPAs) upfront fees for loans backed by Fannie Mae and Freddie Mac. The changes, which go into effect on May 1, has generated a flurry of news reports fixated on why people with higher credit scores might pay more while those with lower credit scores could pay less.
In an interview on Yahoo Finance, Broeksmit expressed his appreciation for being able to address the issue.
“Thanks for asking because there’s been an awful lot of misinformation out there on this, and I’d like to try to clear some of it up,” he said.
Broeksmit pointed out that the price changes are not an overnight occurrence – they were announced in late January and would not have an immediate impact on the mortgage market.
“If one of my member lenders is going to deliver a loan to Fannie Mae or Freddie Mac, that mortgage banker priced the loan to the consumer probably six weeks ago,” he said. “So, these fees are already in the market. So, there’s no magic May 1 date that any consumer needs to worry about.”
He also sought to dispel the notion of certain borrowers paying more than others.
“The second thing is that it is still the case that with the same down payment, borrowers pay less if they have a higher credit score,” he continued. “There’s been some confusion about the changes and some notion that it’s actually better to have a lower credit score or to put less money down in terms of loan pricing. And that’s simply not the case.”
Broeksmit added that next week’s changes “were meant to address some anomalies in the previous pricing structure, and now you’ll see a very smooth increase in price as the credit score worsens. So it makes pretty good sense now.”
Broeksmit stressed the main problem facing the housing market today is not the LLPA changes, but the lack of inventory for buyers.
“What we’re hearing at the Mortgage Bankers Association from member after member is that they have a very full pipeline of qualified borrowers who have their loans approved, subject only to finding a house, and that the inventory of houses for sale is at a stubborn low point,” he said. “So I think the latest numbers from the realtors were 2.6 months. So I don’t attribute the decline in pending home sales to a lack of demand as much as I do a lack of inventory. We’re hearing this in many different parts of the country, where if a house does come on the market, while it’s not the overheated 12 or 15 offers way above asking price that it might have been a year ago, it still moves very quickly, with more than one offer. So we’re really hoping that this as this spring advances that more homeowners will put their homes on the market. And we think that will juice the market nicely.”
This answer is deceiving. In a free market it is unconchable to punish the qualified buyer with good credit scores to FUND buyers of lower credit worthiness. It is pure redistribution of funds with no rights for the punished buyer/seller. Stop this now
I agree 100%! He can spin it any way he wants to but it doesn’t change the fundamental fact that being fiscally responsible and planning for your future is now being punished!
Nothing but a word salad to hide the fact that the Biden administration has decided to punish those who do the right things to give an advantage to those who do the wrong things. Yes if you get a mortgage today and you have a good credit score, thanks to Biden, you will have an added fee for paying your bills on time and not overextending yourself financially. Inversely if you have lousy credit, those fees will be used to improve your monthly pmts to get you into a house that you’ve already proven you likely won’t be able to pay for. Welcome to Biden’s America.
Did you not read the article???
So glad you wrote this article. I personally have a buyer who was going to back away from purchasing because she believed that she would be subsidizing poor credit borrowers with her loan when she has excellent credit.
Plz do further research. Your buyer is correct. The Biden admin area once again is assisting the fiscally irresponsible with higher fees paid by the credit-worthy. Misinformation in this article by not disclosing all facts! Shameful!!
The bottom line is that those with higher credit scores will still be paying less than those with lower credit scores it’s just that the gap between the two will decrease, in contrast tomuch of the disinformation being spread.
It’s really a somewhat subjective issue being that many are reacting as if the traditional spreads that existed between the two is some sort of inherited right set in stone for those with the higher scores for money that isn’t theirs to begin with, that they are only borrowing.
Anyone else notice he still didn’t directly address the changes? Also he didn’t address why changes were needed? It has always been the case that those with better credit scores can secure a lower interest rate and vice versa. Poor credit? Yes there are lenders that will loan you the money, but you will pay a higher rate and fees. So, my question is again, why the necessity to change what is working?
Because the mortgage bankers made a whole lot of money during Covid and now that there is basically no inventory they are not writing many loans. And you know how our economy works today lower demand raise prices-higher demand raise prices.