TODAY’S RATES & HOUSING NEWS
Average Mortgage Interest Rates across the country ticked up about .7% for most scenarios over the past 7 days.
We are now going to include a Green Home Loans Rate Sheet as well as the average interest rates across the country from Mortgage News Daily.
Below are average interest rates across the country.
Overall interest rates have been relatively stable, but slowly moving up over the past few weeks.
OUTRAGE OVER LOAN LEVEL PRICE ADJUSTMENTS
The mortgage industry was on fire last week as Major News Outlets reported that new Fannie Mae changes going into effect May 1st, were charging people with higher credit scores to pay for people with lower credit scores.
“I should stop paying my bills so I can get a better mortgage rate” was something I heard multiple times.
Let’s dig into the changes.
Here is what you need to know:
IS IT TRUE THAT CLIENTS WITH LOWER CREDIT SCORES ARE GETTING BETTER DEALS THAN CLIENTS WITH HIGHER CREDIT SCORES?
There is no situation where clients with lower credit scores are getting a better deal than clients with higher credit scores with the same down payment.
See chart below:
The higher the number, the more the borrower gets penalized with higher rate pricing.
You will see that there is no area where a lower credit score client has a lower number than a higher credit score client with the same loan to value.
Your credit score is also important to qualify for the loan and highly affect mortgage insurance premiums.
Any client should do their best to have the highest credit scores possible to help qualify for home financing as well as get the best deal.
IS IT TRUE THAT CHANGES TO THE LOAN LEVEL PRICE ADJUSTMENT MATRIX BENEFITED LOWER CREDIT SCORE BORROWERS AND PENALIZED HIGHER CREDIT SCORE BORROWERS?
The adjustment for lower credit score borrowers went down (they get better rate pricing) and the adjustment for higher credit score borrowers went up (they get worse rate pricing). There was a wider gap before with rate pricing for lower credit score borrowers. The changes shrunk that gap.
Here is where the outrage lies. Essentially, FHFA subsidized lower credit score borrowers with benefits that higher credit score borrowers are paying for. The irony of the whole situation is that lower credit score borrowers typically will go FHA, especially with the lower FHA Mortgage Insurance Premiums that went into effect in 2023. Most clients with a credit score below 680 will get a lower payment with an FHA Product.
As is often the case, this change was ill-conceived in my opinion and won’t do what it intended to do.
I disagree with the change, but I also don’t think it’s the death of the housing market that many are making it out to be.
News is manipulated to get more views and spark more reaction.
Clients with lower credit scores still get worse pricing.
These changes have been in effect for weeks and we have locked a ton of loans with this updated pricing without client complaints.
I also find if funny how this news went viral last week when this change was announced in January. I discussed these changes many times in this newsletter months ago.
See chart below comparing OLD LLPAs vs. NEW LLPAs.
Lastly, FHFA has now built credit score matrixes for 740-759, 760-779, and 780+.
Before these changes went into effect, 740+ credit score was the highest qualification level.
Now clients over 760 and 780 with down payments less than 40% are getting better rate pricing than 740-759 credit score clients.
FORECLOSURE HEADLINES VS. DATA
Foreclosure activity is another instance of the News reporting correct information but in a context that causes fear and reaction.
What they didn’t headline is Foreclosures have been at record lows for 2 years and there was a Foreclosure moratorium during COVID.
Of course foreclosures are going to go up when they were at some of their lowest levels in history.
Foreclosures in 2022 were lower than every year since 2005 except 2020 and 2021.