(PatriotWise.com) — President Biden has backtracked on his plans to introduce fees on homebuyers with a specified debt-to-income ratio. Under the now-abandoned scheme, borrowers would have been subject to a 0.375% fee if they took out a loan through Fannie Mae and Freddie Mac and if their monthly outgoings exceeded 40% of their income.
Federal Housing Finance Agency Director Sandra Thompson confirmed the scheme had been abandoned and the agency would provide “additional transparency” in the future.
While this specific plan will not go ahead, proposals to charge fees to high-credit borrowers remain on the table.
In April, Republicans attempted to block plans by the Biden administration to subsidize low-credit homebuyers by imposing fees on those with a good credit record. Arizona Republican Rep. Andy Biggs said the proposals would punish people who are financially responsible while rewarding reckless and irresponsible spending.
Bay Equity Home Loans senior loan officer Ian Wright agreed. He said, “The changes do not make sense. Penalizing borrowers with larger down payments and credit scores will not go over well.”
The Biden administration’s justification for the higher fee imposition is to improve “equitable” access to the housing market. Loan applicants with a credit score higher than 680 will be affected. From May 1st, home buyers who apply for a loan of $500,000 will pay a fee of 0.375%, or $1,875. This is up from 0.25%, or $1,250.
The higher fees could increase difficulties in an already fluctuating housing market. There may, however, be good news for buyers. Yale University economist Robert Shiller advised potential homeowners to exercise patience as the market will become friendlier to buyers in 2023. He said property prices will drop later in the year as Federal Reserve interest rate hikes are felt. “Maybe if you have a chance to delay your purchase, it might be a good time to do it. You might get it a little cheaper in another six months,” he said.
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