Is the FHFA Making Home Buying More Affordable?

A rule change related to how America's largest loan guarantors calculate upfront mortgage fees is set to take effect May 1.

Fees on new mortgages will become relatively cheaper for home loans backed by Fannie Mae and Freddie Mac. For borrowers with higher credit scores, the costs are generally increasing.

The updated fee structure means the costs will increase by as much as 0.75% for borrowers with higher credit scores. And for people with lower credit scores, the fees will decrease by as much as 2%.

For example, a buyer with a credit score of 650 putting a 25% down payment on a $400,000 home would now pay 1.5% in fees on the loan, or $4,500. That compares with 2.75%, or $8,250, under the previous fee structure.

Meanwhile, a borrower with a credit score of 750 who puts down 25% on a $400,000 home would now pay 0.375% in fees, or $1,125, compared with 0.250%, or $750, under the previous fee regime.

Why is this happening? In January, the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, announced it wanted to make buying homes more affordable for people who are "limited by wealth or income" and to ensure "a level playing field" for sellers.

The agency updated its mortgage fee structure to accomplish that.

"FHFA is taking another step to ensure that [Fannie Mae and Freddie Mac] advance their mission of facilitating equitable and sustainable access to homeownership,”​ it said in the release.

Not everyone is happy about the newly adjusted fees. Some conservative-leaning commentators have criticized them as a subsidy from higher-income to lower-income borrowers.

Matt Graham, a co-founder of the mortgage news website, said the FHFA has long engaged in that type of cross-subsidy program, especially since the Great Financial Crisis of 2007-08.

"It goes back to its affordable housing goal," Graham said of the agency's new fee structure. "If you only charged absolute, full-market rates, you would only have investment properties in a nation full of renters."

Homeownership has only moved further out of reach for many people who have been shut out by rising interest rates and a low supply of available homes on the market.


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