New Mortgage Rules to Raise Costs for High-Credit Homebuyers, Reduce Penalties for Low Credit

Starting May 1, homebuyers with high credit scores may pay higher mortgage rates — and those with low scores may see lower ones — due to a new federal housing policy.

The Details: As part of its effort to increase housing affordability, the Federal Housing Finance Agency (FHFA) is adjusting credit score factors in the matrices used to determine Fannie Mae and Freddie Mac’s Loan-Level Price Adjustment (LLPA) borrowing fees. According to the FDIC, “Most lenders convert LLPAs into the interest rate on the mortgage, which the borrower pays over time.” The new changes include lower effective cost penalties for borrowers with low credit scores and increased costs for those with high credit scores. The changes were announced on January 19.

For Context: Average U.S. 30-year fixed mortgage rates rose sharply from 3.22% to 6.42% in 2022, but appear to have leveled off somewhat in 2023, reaching 6.39% on April 20. The FHFA’s mortgage changes come on the back of a rise in single-family housing construction and a leveling off of home prices.

How the Media Covered It: While it was unclear what direct involvement President Joe Biden had in the decision, some coverage across the spectrum framed the changes as Biden’s doing. USA TODAY (Lean Left bias) said whether the changes were positive or negative “depends on which side of the spectrum you land,” highlighting an expert who said they “can see both sides.” Coverage was generally more negative in right-rated outlets, many of which framed the changes as “punishing” “good-credit” homebuyers to subsidize “high-risk” homebuyers.