The Federal Housing Finance Agency (FHFA) manages the Fannie Mae and Freddie Mac mortgage loans, which back roughly 50% of the mortgages written in the US. This change in pricing is about the pricing of mortgage fees, often paid up front by the borrower on mortgages financed by these two agencies. In addition to financing mortgages to qualified buyers by assessing the risks associated with each loan, they have a mission to “promote affordable home ownership”. In our market of Fairfield County, only mortgages of up to $726,200 could qualify for these loans. Above that amount would be considered a Jumbo loan, and their mortgage broker would need to shop around for a different lender who has a loan program that could offer better terms, given that buyer’s qualifications, for their home purchase.
Fannie Mae & Freddie Mac charge fees to compensate them for guaranteeing the borrowers mortgage payments. This facilitates the resale of these mortgages to provide liquidity for the US mortgage market.
This is about the Change in the Fees. Many believe this is a new unfair tax on those with higher credit scores. Risky loans, having small down payments (has a high loan-to-value ratio) and lower credit scores for those buyers, will still have to pay higher fees to process that riskier mortgage than those with better credit scores (above 740) and higher down payments of 30% or more. Less risky, borrowers with high wealth, high credit scores, and large down payments could even get their fees reduced or remain flat. First time buyers and those with low-income will be helped to buy a home with this change in fees. It will reduce the fees for those most likely to later default on home mortgages. However, giving people mortgages that they cannot afford to pay, can ruin their lives. We saw this leading up to the financial crisis in 2008 when so many people lost their homes. Some even say “here we go again with the government interfering with home ownership”.
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