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Biden forcing good-credit homebuyers to pay higher fees to subsidize high-risk homebuyers

President Joe Biden speaks in the South Court Auditorium at the White House in Washington, D.C., on Dec. 8, 2022. (Yuri Gripas/Abaca Press/TNS)
April 20, 2023

Under a new Biden administration rule, home buyers with good credit will soon be forced to pay higher mortgage rates to subsidize loans issued to higher-risk borrowers.

The risk-sharing changes, which effectively penalize Americans who have maintained good credit scores, go into effect on May 1.

Industry experts believe homebuyers who have credit scores above 680 will pay roughly $40 more per month on a $400,000 home loan. Purchasers who provide a larger down payment will also pay higher fees, The Washington Times reported.

On the other hand, homebuyers with credit scores lower than 679 will receive better mortgage rates, according to the New York Post, which reported that a buyer with a 620 credit score and a 5 percent or less down payment will get a 1.75 percent fee discount.

The new fees will impact Americans who buy or refinance a home after May 1.

“The changes do not make sense. Penalizing borrowers with larger down payments and credit scores will not go over well,” said Ian Wright, a senior home loan officer based in the San Francisco Bay Area. “It overcomplicates things for consumers during a process that can already feel overwhelming with the amount of paperwork, jargon, etc. Confusing the borrower is never a good thing.”

Wright warned the changes will “cause customer-service issues for lenders and individual loan officers when a consumer won’t understand why their interest rate and fees suddenly changed.”

“I am all for the first-time buyer having a chance to get into the market, but it’s clear these decisions aren’t being made by folks that understand the entire mortgage process,” Wright added.

Another Arizona-based mortgage loan originator expressed frustration over the Biden administration’s new rule.  

“It’s going to be a challenge trying to explain to somebody that says, ‘I worked my whole life for high credit and I’ve put a lot of money down and you’re telling me that’s a negative now?’ That’s a hard conversation to have,” the individual said.