Having good credit is now frowned upon

[Deleted member 18333]

Not exactly. Banks were incentivized by Government to give folks with poor credit a loan.

Banks were incentivized by profit to give folks with poor credit a loan. Now banks are being incentivized by Government intervention to give folks with poor credit a loan. Results will be the same.

 

[BackofBeyond]

Not exactly. Banks were incentivized given a free pass by Government to give predatory loans to folks with poor credit a loan.

Just a little editorialization by myself... And it started much further back than just 15 years. Like another 8 years back.

 

[NDGuy]

I personally think the FWP and other agencies should adopt a similar policy regarding point banking. Any NR with 2 or less points that applies should be in a party app with people with 10+ points.

For fairness....

 

[TheJason]

If you consider that over the lifetime of the loan it will cost the borrower with GOOD credit an extra $14,000 in interest it should make people angry.

How do you figure?

For example, if you have a score of 659 and are borrowing 75% of the home's value, you'll pay a fee equal to 1.5% of the loan balance. Before these changes, you would have paid a 2.75% fee. On a hypothetical $300,000 loan, that's a difference of $3,750 in closing costs.


On the other end, if you have a credit score of 740 or higher, you would have paid a 0.25% fee on a loan for 75% of your home value before May 1. After that date, you could pay as much as 0.375%.

This is for closing costs, not APR. based on my math, closing costs on a $300,000 house increased by $500 for someone with good credit and 20% down.

 

[4ohSick]

Direct quote from your linked article: "If you have a top credit score, you’ll still pay less than if you have a low credit score. However, the penalty now for having a lower credit score will be smaller than it was before May 1." Man, people work real hard to find things to get pissed about.

edit: but yes, please, tank your credit to prove a point. I'm sure it will be worth it.

 

[gouch]

If you consider that over the lifetime of the loan it will cost the borrower with GOOD credit an extra $14,000 in interest it should make people angry.

How does this possibly affect the amount of interest you pay?

Some of you must have read a different article than the one posted. This only affects what Fannie Mae and Freddie Mac are charging as a cost of getting a loan. Other loaners can do what they want. If you are a good negotiator, you can sometimes get the loan institution to eat those fees anyway or get the seller to pay them. This has nothing to do with poor vs. rich or Dem vs. Rep. it's just an adjustment on the way they use credit scores in determining fees. Which has always been an arbitrary way of gouging people. The reason for this adjustment was stated pretty clearly in the article:

These changes are part of the Federal Housing Finance Agency’s (FHFA) broader examination of fees to provide “equitable and sustainable access to homeownership” (Political speak) and shore up capital at Freddie Mac and Fannie Mae. (The real reason)

 

[Ben Lamb]

edit: but yes, please, tank your credit to prove a point. I'm sure it will be worth it.

 

[SAJ-99]

These threads are entertaining. We go from posts that scream “personal responsibility” to others that blame banks and the government anytime something goes wrong.

For those that are interested.

Loan-Level Pricing Adjustments (LLPA): A Complete Guide

The loan-level pricing adjustment (LLPA) system raises mortgage rates for conventional mortgage borrowers. How LLPAs work, and how to reduce your costs.

themortgagereports.com

 

[Scott85]

So I have a story to tell…..

I got stationed in West Virginia in 2008, it was such a nice area with the base I bought a house. Well when my 4 years was up, there was rumors of the base shutting down. I put a new roof on the house, painted every room and got the house ready to put on the market. Realtors came out looked the house over and we put the house on the market. The house sat on the market for over a year with zero offers being put in on the house. By this time the base had made it official that it was closing and the base was the #1 employer of the county. At that time we lowered the asking price by 20k. It sat on the market for whose knows how long, the realtors ended up taking it off the market.
In October 2013 I stopped making payments on the house. To this day the bank has yet to foreclose on the house. The bank has kept up with the taxes and insurance all this time. It appears that the bank isn’t making any attempt to foreclose on the property and statute of limitations on a written contract expires in 10 years. October of this year will be 10 years since my last payment and I’ll will try to take over ownership from the bank, remove my name from the mortgage and have them remove any record of missed or late payments from my credit report.

 

[Treeshark]

Just to make sure I’m following that- you want to retain ownership of the house after all of that went down?

 

[Scott85]

Just to make sure I’m following that- you want to retain ownership of the house after all of that went down?

I would donate it or sell it for pennies on the dollar.

 

[mdhunter]

How does this possibly affect the amount of interest you pay?

Some of you must have read a different article than the one posted. This only affects what Fannie Mae and Freddie Mac are charging as a cost of getting a loan. Other loaners can do what they want. If you are a good negotiator, you can sometimes get the loan institution to eat those fees anyway or get the seller to pay them. This has nothing to do with poor vs. rich or Dem vs. Rep. it's just an adjustment on the way they use credit scores in determining fees. Which has always been an arbitrary way of gouging people. The reason for this adjustment was stated pretty clearly in the article:

These changes are part of the Federal Housing Finance Agency’s (FHFA) broader examination of fees to provide “equitable and sustainable access to homeownership” (Political speak) and shore up capital at Freddie Mac and Fannie Mae. (The real reason)

I think it is the DTI fees coming in August that will raise interest costs for many borrows for the loan duration.

https://buckleyfirm.com/blog/2023-03-17/fhfa-delays-effective-date-dti-ratio-based-fee

That said, I will let a real mortgage broker step in and clarify.

 

[Dougfirtree]

Easy to understand the frustration being expressed here, but let's not forget that personal credit is a deeply imperfect representation of someone's actual financial responsibility. I have one credit card and we pay it off, in full, every month. I've been told that the single most meaningful thing I can do to improve my credit from good to excellent is to get another credit card and use it... What I would consider my financial responsibility is actually hurting my credit...

 

[shrapnel]

I can’t ever remember having a credit score or even checking on it. It seems it is reference in how poor you are on financial decisions…

 

[2rocky]

I was 5 points away from the best rate on my solar loan last month. Chapped my butt.. But if everything goes right I can pay it off early and hose them out of the extra interest.

 

[TN2shot07]

I don’t think there’s any arguing that that system is broken as far as a way to measure financial responsibility.

It’s a convenient way for financial institutions to push people to continually stay in debt.

 

[hank4elk]

What's credit?

 

[Deleted member 28227]

Direct quote from your linked article: "If you have a top credit score, you’ll still pay less than if you have a low credit score. However, the penalty now for having a lower credit score will be smaller than it was before May 1." Man, people work real hard to find things to get pissed about.

edit: but yes, please, tank your credit to prove a point. I'm sure it will be worth it.

Poors...

 

[gwhunter]

So I guess it's time to go finance some cars and make bad life decisions to get my credit under 740. Am I missing something in this article that logically explains why a responsible person with good credit is being penalized?

Edit, apparently being fiscally responsible is racist or unfair to stupid people.

I'm open to suggestions on how to drop my credit score 70+ points so I can avoid paying higher rates on any future real estate transactions.

Mortgage fees are changing for homebuyers next month. Here's what you should know. - NewsBreak

If you plan to buy a house soon, you should be aware of these fee changes that will affect your upfront costs.

www.newsbreak.com

I think yeah. All it looks like is an adjustment of fees.
High score = 0.375% fee
Low score= 2.75% fee

The fees just got lowered for poor credit and increased for good credit. But it's still not advantageous to lower your credit score in this scenario. Still seems like a win for you.

 

[schmalts]

So I guess it's time to go finance some cars and make bad life decisions to get my credit under 740. Am I missing something in this article that logically explains why a responsible person with good credit is being penalized?

Edit, apparently being fiscally responsible is racist or unfair to stupid people.

I'm open to suggestions on how to drop my credit score 70+ points so I can avoid paying higher rates on any future real estate transactions.

Mortgage fees are changing for homebuyers next month. Here's what you should know. - NewsBreak

If you plan to buy a house soon, you should be aware of these fee changes that will affect your upfront costs.

www.newsbreak.com

Better off not voting for stupid people that think this is a good idea