The Biden administration is set to introduce a new rule that will require good credit home buyers to pay more for their mortgages, with the extra funds being used to subsidize loans for higher-risk borrowers.
According to a report in the Washington Times on Tuesday, experts believe that borrowers with a credit score above 680 could end up paying an additional $40 per month on a $400,000 mortgage when the Federal Housing Finance Agency’s new rules come into effect on May 1st. These added costs will help to support those with lower credit ratings who are also in search of a mortgage.
However, some industry experts believe that the new rules will only serve to frustrate and confuse borrowers, making an already overwhelming process even more complicated. David Stevens, a former commissioner of the Federal Housing Administration during the Obama administration, called the new approach “confusing” and said that it “couldn’t come at a worse time for an industry struggling to get back on its feet after these past 12 months.”
The rules come at a time when the housing market has already been struggling due to multiple interest rate increases by the Federal Reserve. While the Federal Housing Finance Agency Director Sandra Thompson said that the new rules were designed to increase pricing support for purchase borrowers limited by income or wealth, some industry experts argue that attempting to manipulate prices is not the solution to the problem of the gap in access to credit.
“The gap in homeownership opportunity is real,” Stevens said. “America is facing a severe shortage of affordable homes for sales combined with excessive demand causing an imbalance. But convoluting pricing and credit is not the way to solve this problem.”