Any mortgage lenders/banking folks that know about this apparent housing rule to take affect 1MAY?

[nittanyfan333]

not asking to get political, just seeking further information. first i've heard of this. The mortgage borrowing world is a gray space that i'm not well versed in. are there specific numbers/percentages or is it a flat fee? Any additional details? there are only like 2-3 articles that i've been able to find (since I dont' have the specific rule name to search, so it's all been boolean) and they're behind paywalls.

AGAIN, and i can't stress this enough.... i'm just looking for an understanding of this.

BL from a WSJ (take it with the usual partisan skepticism): "Under the rule, which goes into effect May 1, home buyers with a good credit score over 680 will pay about $40 more each month on a $400,000 loan, and upward depending on the size of the loan. Those who make down payments of 20% on their homes will pay the highest fees. Those payments will then be used to subsidize higher-risk borrowers through lower fees."

 

[BobPSU92]

Sounds sort of like stealing from the rich and giving to the poor (and people who look like them).

 

[91Joe95]

Encouraging more loans? Sounds like a banker's dream. Housing bubble part deux.

 

[Tom McAndrew]

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

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

www.usatoday.com

 

[Tom McAndrew]

Mortgage fees on home loans backed by Fannie Mae and Freddie Mac are going up

The increase will affect many borrowers across a range of credit scores, but the change is ultimately designed to help make homeownership more accessible.

www.nbcnews.com

 

[PSUFTG]

not asking to get political, just seeking further information. first i've heard of this. The mortgage borrowing world is a gray space that i'm not well versed in. are there specific numbers/percentages or is it a flat fee? Any additional details? there are only like 2-3 articles that i've been able to find (since I dont' have the specific rule name to search, so it's all been boolean) and they're behind paywalls.

AGAIN, and i can't stress this enough.... i'm just looking for an understanding of this.

BL from a WSJ (take it with the usual partisan skepticism): "Under the rule, which goes into effect May 1, home buyers with a good credit score over 680 will pay about $40 more each month on a $400,000 loan, and upward depending on the size of the loan. Those who make down payments of 20% on their homes will pay the highest fees. Those payments will then be used to subsidize higher-risk borrowers through lower fees."

You have the gist of it correct.
And the dollar figures you cited are probably within rounding error of what one can expect.

That said - and not to discount the issue you raise - that is peanuts compared to the fact that the AVERAGE monthly mortgage payment, for the AVERAGE buyer, buying the AVERAGE house, has been driven up by over $700 per MONTH over the last 24 months.
Think about that for a moment. $700 per month increase for a new buyer - who is buying the same house, at the same PRICE - just over the last two years.

That is the Mortgage end of it. And that does NOT include the impact of supply-side shortages driving up the base price - which may very well add another $500 or so per month (on average)

Bottom line - and it doesn't take a LionJim to do the math - $1,000 or more per month (month after month after month) out of the pockets of potential new homebuyers (many of whom, based on those changes, won't be able to become ACTUAL new homebuyers), with nothing to show for it.
Ouch

 

[nittanyfan333]

You have the gist of it correct.
And the dollar figures you cited are probably within rounding error of what one can expect.

That said - and not to discount the issue you raise - that is peanuts compared to the fact that the AVERAGE monthly mortgage payment, for the AVERAGE buyer, buying the AVERAGE house, has been driven up by over $700 per MONTH over the last 24 months.
Think about that for a moment. $700 per month increase for a new buyer - who is buying the same house, at the same PRICE - just over the last two years.

That is the Mortgage end of it. And that does NOT include the impact of supply-side shortages driving up the base price - which may very well add another $500 or so per month (on average)

Bottom line - and it doesn't take a LionJim to do the math - $1,000 or more per month (month after month after month) out of the pockets of potential new homebuyers (many of whom, based on those changes, won't be able to become ACTUAL new homebuyers), with nothing to show for it.
Ouch

Yeah the $ part of it doesn’t concern me. The principle part of it does.

can you talk to that at all? Where is this 40$ a month going besides “subsidize high risk borrowers through lower fees”. And again, pretend I’m 5 (I can admit my shortcomings in knowledge)

 

[Lion84]

Seems more like income redistribution - can the next Big Short be far behind.

 

[PSUFTG]

Yeah the $ part of it doesn’t concern me. The principle part of it does.

can you talk to that at all? Where is this 40$ a month going besides “subsidize high risk borrowers through lower fees”. And again, pretend I’m 5 (I can admit my shortcomings in knowledge)

Keep in mind, these changes only effect MORTGAGES (someone paying cash for a house is not affected by these specific changes, of course)

The impact - and how it translates to your monthly bottom line payments - is an increase in the base amount (principal) of the mortgage.
The impact is exactly the same as if there was a $X increase in the sales price. That "X" in this case, translates, for the average high quality borrower - according to the article you cited (which seems to be more or less accurate) is to raise your monthly payment by $40 dollars. Why? Again, according to the article you cited - which appears to be accurate - to allow the mortgage institutions to subsidize lower quality borrowers.
If you've ever been in that market, you probably know that lower quality borrowers generally pay a higher cost (premium) to account for the greater credit risk to the lender. This change works to push some of that cost to the higher quality borrowers (in a nutshell).

 

[BobPSU92]

Seems more like income redistribution - can the next Big Short be far behind.

Big Short?

 

[nittanyfan333]

Keep in mind, these changes only effect MORTGAGES (someone paying cash for a house is not affected by these specific changes, of course)

The impact - and how it translates to your monthly bottom line payments - is an increase in the base amount (principal) of the mortgage.
The impact is exactly the same as if there was a $X increase in the sales price. That "X" in this case, translates, for the average high quality borrower - according to the article you cited (which seems to be more or less accurate) is to raise your monthly payment by $40 dollars. Why? Again, according to the article you cited - which appears to be accurate - to allow the mortgage institutions to subsidize lower quality borrowers.
If you've ever been in that market, you probably know that lower quality borrowers generally pay a higher cost (premium) to account for the greater credit risk to the lender. This change works to push some of that cost to the higher quality borrowers (in a nutshell).

appreciate that. From that point forward, i guess personal agreement/acceptance of this "program" all comes down to each individual's personal beliefs on redistribution as a whole.

Thanks again for your explanations.

 

[Achowalogan]

Next change expected is the elimination of the ability to convert traditional IRA to Roth IRA….Only rich people have an IRA and we need to tax them to the fullest extent….

 

[Woodpecker]

So make a smaller down payment and huge first mortgage payment?

 

[PSUFTG]

So make a smaller down payment and huge first mortgage payment?

The way some of the articles on the subject have been written, that might be something that someone would actually ponder over with the idea that it might be beneficial (as illogical as it is). Alas, taking a deeper look at the parameters, it is not.

 

[s1uggo72]

Big Short?

Read the book which is great about the 2008 crisis

 

[s1uggo72]

Next change expected is the elimination of the ability to convert traditional IRA to Roth IRA….Only rich people have an IRA and we need to tax them to the fullest extent….

But when you convert a traditional IRA to a David Lee Roth IRA you ate taxed as income on the untaxed portion

 

[s1uggo72]

appreciate that. From that point forward, i guess personal agreement/acceptance of this "program" all comes down to each individual's personal beliefs on redistribution as a whole.

Thanks again for your explanations.

So how was this program initiated?? Did Congress pass a law? Executive order?? Somebody just thought it was a good idea ??

 

[Achowalogan]

But when you convert a traditional IRA to a David Lee Roth IRA you ate taxed as income on the untaxed portion

Yes, initially…but all the future years of growth are not taxed…and, depending on how invested and years invested, especially since there is no RMD and can be left tax-free to children…the growth can be spectacular…and real….

 

[s1uggo72]

Yes, initially…but all the future years of growth are not taxed…and, depending on how invested and years invested, especially since there is no RMD and can be left tax-free to children…the growth can be spectacular…and real….

All true? But how do you get the money in the first place. ?? There are income limits on who can do a Roth?
heck why not do a 529 plan instead

 

[GrimReaper]

So how was this program initiated?? Did Congress pass a law? Executive order?? Somebody just thought it was a good idea ??

The Federal Housing Finance Agency(FHFA), which oversees Fannie and Freddie, announced the change in January. So, yes, someone thought it was a good idea.

 

[Achowalogan]

All true? But how do you get the money in the first place. ?? There are income limits on who can do a Roth?
heck why not do a 529 plan instead

Well, I did a 529 Roth at work and also a personal Roth…remember my initial comment was about the future elimination of the traditional IRA to Roth conversation so that the government could tax all IRA returns….

 

[Midnighter]

not asking to get political, just seeking further information. first i've heard of this. The mortgage borrowing world is a gray space that i'm not well versed in. are there specific numbers/percentages or is it a flat fee? Any additional details? there are only like 2-3 articles that i've been able to find (since I dont' have the specific rule name to search, so it's all been boolean) and they're behind paywalls.

AGAIN, and i can't stress this enough.... i'm just looking for an understanding of this.

BL from a WSJ (take it with the usual partisan skepticism): "Under the rule, which goes into effect May 1, home buyers with a good credit score over 680 will pay about $40 more each month on a $400,000 loan, and upward depending on the size of the loan. Those who make down payments of 20% on their homes will pay the highest fees. Those payments will then be used to subsidize higher-risk borrowers through lower fees."

Someone tell me what I can do about 20% property tax increases the past two years.....(we timed our mortgage right at a historical low just before the pandemic thank Baby Jesus).....

 

[s1uggo72]

Well, I did a 529 Roth at work and also a personal Roth…remember my initial comment was about the future elimination of the traditional IRA to Roth conversation so that the government could tax all IRA returns….

529 Roth?

 

[s1uggo72]

The Federal Housing Finance Agency(FHFA), which oversees Fannie and Freddie, announced the change in January. So, yes, someone thought it was a good idea.

What gives them the authority??

 

[GrimReaper]

What gives them the authority??

The law that establishes it.

 

[Achowalogan]

529 Roth?

Yes, offered by employer, and there is not a $7,000.00 limit. Great way to tuck away a big chunk of salary

 

[s1uggo72]

Yes, offered by employer, and there is not a $7,000.00 limit. Great way to tuck away a big chunk of salary

I think you are mixing terms. There’s a 529 plan. There’s a Roth IRA, which you can convert some part of a 529 plan to a Roth IRA but I don’t think there’s a 529 Roth plan

 

[SleepyLion]

I think you are mixing terms. There’s a 529 plan. There’s a Roth IRA, which you can convert some part of a 529 plan to a Roth IRA but I don’t think there’s a 529 Roth plan

I agree the terms are probably being mixed. There are 401k Roths and 403b Roths and 457 Roths (403b and 457 are usuallyonly availablethrough non-profitsand governments). I'm not sure if there are 529 Roths and I am not sure what the purpose would be. 529 plans are funded tax free (better than Roth) and are not taxed if used for education (same as Roth). Also, within limits you can convert a 529 to a Roth IRA.
Also, (I'm not sure if this is still available) if you make a non-deduductable contribution to an IRA you can convert this to a Roth and increase the Roth limits (aka backdoor Roth).

 

[leinbacker]

not asking to get political, just seeking further information. first i've heard of this. The mortgage borrowing world is a gray space that i'm not well versed in. are there specific numbers/percentages or is it a flat fee? Any additional details? there are only like 2-3 articles that i've been able to find (since I dont' have the specific rule name to search, so it's all been boolean) and they're behind paywalls.

AGAIN, and i can't stress this enough.... i'm just looking for an understanding of this.

BL from a WSJ (take it with the usual partisan skepticism): "Under the rule, which goes into effect May 1, home buyers with a good credit score over 680 will pay about $40 more each month on a $400,000 loan, and upward depending on the size of the loan. Those who make down payments of 20% on their homes will pay the highest fees. Those payments will then be used to subsidize higher-risk borrowers through lower fees."

From each according to their ability,
To each according to their need.

 

[razpsu]

Obviously we didn’t learn from 2008. High credit scores that put down 15-20 percent pay a 1% surcharge basically and people with low credit score that put 5 percent down get 1.8 percent deduction.

 

[s1uggo72]

I agree the terms are probably being mixed. There are 401k Roths and 403b Roths and 457 Roths (403b and 457 are usuallyonly availablethrough non-profitsand governments). I'm not sure if there are 529 Roths and I am not sure what the purpose would be. 529 plans are funded tax free (better than Roth) and are not taxed if used for education (same as Roth). Also, within limits you can convert a 529 to a Roth IRA.
Also, (I'm not sure if this is still available) if you make a non-deduductable contribution to an IRA you can convert this to a Roth and increase the Roth limits (aka backdoor Roth).

Yes you can but you are limited by the amount you can put into an Ira. Plus the gain is taxed. But if done on the same or next day how much could the gain be? Interest for a day??

 

[s1uggo72]

Obviously we didn’t learn from 2008. High credit scores that put down 15-20 percent pay a 1% surcharge basically and people with low credit score that put 5 percent down get 1.8 percent deduction.

What’s wrong with this world?? Tostally back a$$ ward

 

[Achowalogan]

I agree the terms are probably being mixed. There are 401k Roths and 403b Roths and 457 Roths (403b and 457 are usuallyonly availablethrough non-profitsand governments). I'm not sure if there are 529 Roths and I am not sure what the purpose would be. 529 plans are funded tax free (better than Roth) and are not taxed if used for education (same as Roth). Also, within limits you can convert a 529 to a Roth IRA.
Also, (I'm not sure if this is still available) if you make a non-deduductable contribution to an IRA you can convert this to a Roth and increase the Roth limits (aka backdoor Roth).

You are correct, I was mixed up. I have a 401k Roth. Annual contribution limit 20,500. If over 50 can contribute 27,000. Great way to tuck away tax free gains….I hate being old and confused.

My initial comment was about the elimination of the traditional to Roth IRA conversion…I expect to see this proposed..

 

[s1uggo72]

You are correct, I was mixed up. I have a 401k Roth. Annual contribution limit 20,500. If over 50 can contribute 27,000. Great way to tuck away tax free gains….I hate being old and confused.

My initial comment was about the elimination of the traditional to Roth IRA conversion…I expect to see this proposed..

Don’t forget
Depending on your plan, you may be able to make post-tax contributions beyond the pretax and Roth contribution limit but less than the combined employee and employer contribution limit to invest even more for retirement.

 

[Creamery]

Am I correct that this new rule doesn’t apply to private mortgages (just govt backed mortgages such as Fannie Mae & Freddie Mac)? And if so wouldn’t those with good credit and cash (ie 20%down payt or more) go that route for a mortgage? I’m not an expert on this so it’s a bit confusing.

Also, I’m wondering what the implications of this will be for those with some cash and good credit and who want to invest in Real Estate? Will they take their money and invest in other things like the market where there aren’t these penalties?

 

[91Joe95]

Obviously we didn’t learn from 2008. High credit scores that put down 15-20 percent pay a 1% surcharge basically and people with low credit score that put 5 percent down get 1.8 percent deduction.

Oh, they learned. They learned the government will bail them out, and the politicians learned there is opportunity for massive graft in these bailout bills on top of their previous investments.

 

[Lion84]

What’s wrong with this world?? Tostally back a$$ ward

Last time it was the mortgage companies with their laugher no doc loans now the Fed is the one pushing unqualifies people into houses they can't afford - wait until people have to pay the taxes and all other expenses that increase along with the value of the house - plain stupid.

 

[Achowalogan]

Last time it was the mortgage companies with their laugher no doc loans now the Fed is the one pushing unqualifies people into houses they can't afford - wait until people have to pay the taxes and all other expenses that increase along with the value of the house - plain stupid.

Sorry to say, in the end you and I will be paying for these folks one way or another....

 

[northwoods]

Yes, initially…but all the future years of growth are not taxed…and, depending on how invested and years invested, especially since there is no RMD and can be left tax-free to children…the growth can be spectacular…and real….

In hindsight, I wish all my IRA's were Roth. The advantages are huge --- especially when it comes time for RMD's and passing those accounts on both before and after your death.

 

[northwoods]

What’s wrong with this world?? Tostally back a$$ ward

You got that right. Essentially, if you have worked hard, saved money to accumulate a decent down payment percentage, paid your bills, etc., you are being charged a surcharge to offset mortgages made to less credit worthy individuals with minimal down payment percentages and poor credit scores and histories. In theory "to offset their loan delinquencies". This new law applies only to federally backed home mortgages and will not apply to cash buyers or those who obtain their loans through the private sector.