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History often repeats itself, but not always so quickly. The US is now subsidizing high-risk homebuyers at the expense of those with good credit – AGAIN.
The 2008 financial crisis, caused in large part due to the housing market crash that year, remains one of the most significant events in the history of the United States housing market. According to Investopedia, “Collapsing home prices from subprime mortgage defaults and risky investments on mortgage-backed securities burst the housing bubble in 2008.”
What are subprime mortgages? Mortgages issued to borrowers with low, or “subprime,” credit ratings who cannot secure a conventional mortgage because of their greater-than-average risk of defaulting on the loan. Largely due to pressures from the government via the Federal Housing Authority, mortgages were expanded to borrowers that were unlikely to honor the loan. That is the impetus of one of the most significant financial events in US history.
And now we are going to do it all over again.
A recent and largely unnoticed revamp of federal rules on mortgage fees “will offer discounted rates for home buyers with riskier credit backgrounds — and force higher-credit homebuyers to foot the bill,” according to an April 16th New York Post article.
At a time when banks are failing and the US economy teeters on the edge of ruin, Fannie Mae and Freddie Mac (key players in the 2008 collapse) will enact loan-level price adjustments (LLPAs) that will affect mortgages originating at private banks nationwide.
According to industry pros cited in the Post article, “...pricier monthly mortgage payments for most homebuyers — an ugly surprise for those who worked for years to build their credit, only to face higher costs than they expected as part of a housing affordability push by the US Federal Housing Finance Agency.” They add, “Under the new rules, high-credit buyers with scores ranging from 680 to above 780 will see a spike in their mortgage costs – with applicants who place 15% to 20% down payment experiencing the biggest increase in fees.”
“It’s unprecedented,” said David Stevens, who served as Federal Housing Administration commissioner during the Obama administration. “My email is full from mortgage companies and CEOs [telling] me how unbelievably shocked they are by this move.”
Okay, so why? Why is the FHA and the government repeating the mistakes of 2008 now? This appears to be additional evidence that the Biden Administration and his Executive Branch agencies are intentionally destroying America.
You are the check and balance on the Executive Branch. Do your job and remember your oath.
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