A case study on the news and the narrative regarding the new mortgage interest pricing.

BMWTurboDzl said:
Correct but as the article mentions the discount was going to drop regardless because the GSE's have to make more $$ in order to rebuild their capital base. In light of this information you can't say that some higher score borrowers are now subsidizing lower score borrowers.
If you drill down to the bottom of the article and look at the Final LLPA you can see that lower scores are still paying more than better scores.

What wasn't mentioned in the article is how few these "lower score" borrowers actually exist. Of loans delivered approx 3 percent of the portfolio is comprised of borrowers under 660. 65 percent of the portfolio consists of borrower with scores at/over 740 and 22 percent are between 700-739. So 82 percent of the deliveries are borrowers with above average credit. If a company has to, by gov decree, rebuild its capital base where is it going to look to do that? Is it going to look at the 3 percent of the portfolio or the 82 percent?


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The math still doesn't work. If the requirement was to raise more capital - then everyone should be paying the same increase amount. ie if they need 1% on average additional G-Fee - then everyone's fee goes up by 1% - there then is no longer a spread - its the same across the board. What the chart says is some paid comparatively more, some less, and some the same? So its not math.

It also can't be risk, since risk is already accommodated in both credit score (likelihood of default) and down payment (cost if there is a default).

So were back to something other than math demanding the change. It certainly caught peoples attention, for right or wrong.

If you want to get further into the weeks, the decision to raise more capital goes back 2 years, but they simply chose not to do anything about it then. Also the debate to require more capital is still ongoing. https://furmancenter.org/thestoop/e...tal-does-this-mean-a-large-increase-is-coming
 
SC Maintenance said:
The math still doesn't work. If the requirement was to raise more capital - then everyone should be paying the same increase amount. ie if they need 1% on average additional G-Fee - then everyone's fee goes up by 1% - there then is no longer a spread - its the same across the board. What the chart says is some paid comparatively more, some less, and some the same? So its not math.

It also can't be risk, since risk is already accommodated in both credit score (likelihood of default) and down payment (cost if there is a default).

So were back to something other than math demanding the change. It certainly caught peoples attentio
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SC Maintenance said:
n, for right or wrong.

If you want to get further into the weeks, the decision to raise more capital goes back 2 years, but they simply chose not to do anything about it then. Also the debate to require more capital is still ongoing. https://furmancenter.org/thestoop/e...tal-does-this-mean-a-large-increase-is-coming
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Raising more capital is part of the reason rather than the sole reason. G-fees were increased btw. The narrative was that it was done to subsidize borrowers with worse credit. In addition it is partly about risk and return on capital.

As for whether the current g fee is sufficient that's above my pay grade.

www.urban.org

Understanding the Impact of Recent Changes to the Federal Housing Finance Agency’s Loan-Level Price Adjustment

Janneke Ratcliffe, vice president of the housing finance policy center at the Urban Institute, testified before the Subcommittee on Housing and Insurance of the US House Financial Services Committee regarding pricing decisions with regard to loan-level price adjustments.
www.urban.org www.urban.org
 
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JeffKeryk said:
Sure. That's why I prefaced my post with, "Paying rent makes sense for some and at different periods in one's life."
I am working with my grand nieces regardiing your well taken points as we speak. I don't believe buying is the best scenario for them right now.
One needs to know what they are getting into, especially with a purchase as big (and important) as a home purchase.

But having a home free and clear, especailly when one's working days are over, a pretty good position to be in.
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I apologize, because you did, in fact, say that. I didn’t remember that qualification in reading your post.

I think my principal concern when you are talking about how to be successful, is that your story includes incredible luck in so many dimensions of your success.

Your house is worth 10 times what you paid for it. Prop 13 limits your property tax. You got an incredible deal for solar that is no longer offered. You got paid a very high salary and you got options that others don’t.

If you had bought a house in, say Connecticut*, it would be worth about what you paid for it in 1992, your property tax would be far higher than it is in California. Your salary and stock options would be a fraction of what they were. CT income tax, like CA, exceeds 10% in the top bracket, but with none of the property appreciation or tech industry opportunities.

In CT, you would still be working and you would have a fraction of your current net worth.

Even though you worked just as hard.

But you got lucky. Very lucky. You live in a bubble of conditions that don’t exist for most of the readers on this forum. Don’t discount that.


*Following my Dad’s death in 1991, mom sold the house I grew up in in 1993, for $400,000. It changed hands in 2003. For $407,000. Again in 2016 for $410,000. Property taxes exceed $8,000/year.

My example is based on concrete evidence in the town of Bloomfield, CT. Named in 1976 as “The All American Town” by Time Magazine. A great place to grow up. A wonderful small town.

But fiscal suicide were I to move back there now.
 
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We mustn't kid ourselves. The main reason the people we can't openly discuss on this board are involved in mortgages at all is because it gives them power and control over us. Every single person regardless of their credit score should be livid over this development.
 
SubieRubyRoo said:
We mustn't kid ourselves. The main reason the people we can't openly discuss on this board are involved in mortgages at all is because it gives them power and control over us. Every single person regardless of their credit score should be livid over this development.
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That's being a bit dramatic. There's a cost to borrowing money, you can split hairs all day over what's fair but it is what it is.
 
Astro14 said:
I apologize, because you did, in fact, say that. I didn’t remember that qualification in reading your post.

I think my principal concern when you are talking about how to be successful, is that your story includes incredible luck in so many dimensions of your success.

Your house is worth 10 times what you paid for it. Prop 13 limits your property tax. You got an incredible deal for solar that is no longer offered. You got paid a very high salary and you got options that others don’t.

If you had bought a house in, say Connecticut*, it would be worth about what you paid for it in 1992, your property tax would be far higher than it is in California. Your salary and stock options would be a fraction of what they were. CT income tax, like CA, exceeds 10% in the top bracket, but with none of the property appreciation or tech industry opportunities.

In CT, you would still be working and you would have a fraction of your current net worth.

Even though you worked just as hard.

But you got lucky. Very lucky. You live in a bubble of conditions that don’t exist for most of the readers on this forum. Don’t discount that.


*Following my Dad’s death in 1991, mom sold the house I grew up in in 1993, for $400,000. It changed hands in 2003. For $407,000. Again in 2016 for $410,000. Property taxes exceed $8,000/year.

My example is based on concrete evidence in the town of Bloomfield, CT. Named in 1976 as “The All American Town” by Time Magazine. A great place to grow up. A wonderful small town.

But fiscal suicide were I to move back there now.
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Astrro, there is no reason for you to apologize to me. We are in an ongoing conversation and are listening to each other, along with all the other contributers. I learn from you and respect your opinions. You in turn listen to my malarkey! You're aces in my book.

My point is, or should say strategy is, minimizing recurring costs. Our working days will be over one day, if we are lucky enough to live that long. I hate payments, because I was flat busted for a long time. And homeless, which, believe me, is a desperate condition to be in. Old ripped Levis and worn boots. Not knowing where I might sleep. Couch surfing at best. I never wanna be there again. Having a home free and clear is a great feeling and a hedge against inflation. One can also leverage one's home to help others who may not be so lucky. It is a home base.

If anything I am the ultimate fiscal conservatist because I know the other side of life. Live in the current but you sure better plan for the future. That's my 2 cents.

By the way you are spot on about me being lucky, and trust me I know it. Living anywhere but in Silicon Valay, aka the land of unlimited opportunity, and I would likely be regluated to a pretty rough life due to my own decisions. This place is incredible.
 
JeffKeryk said:
A home is both. Paying rent makes sense for some and at different periods in one's life. I sold a home at a loss in the down market about 1994 and bought the worst home in Los Gatos, considered a good neighborhood. Well, this home is paid off and worth $2M. So yeah, no rent or payments. Just a nice peaceful place to live for peanuts. Having a home free and clear is an incredible feeling. I am one of the lucky ones, for sure...
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Don't forget the California's wonderful property taxes, Jeff. With annual appraisals at or near the 2% limit and Santa Clara's .67%, it costs to own!
 
One could argue that buyers with higher credit scores were historically undercharged while those with lower credit scores were historically overcharged and that reducing the spread between these two groups of borrowers is merely restoring some equity to the charges, particularly since these lower scoring buyers will be required to provide PMI and property tax escrows.
One should also consider that the long-term fixed rate mortgages we benefit from in our country were a creation of the federal government based upon a policy decision that home ownership should be encouraged and expanded.
You won't find the kind of mortgages we enjoy here anywhere else as far as I know.
 
fdcg27 said:
One could argue that buyers with higher credit scores were historically undercharged while those with lower credit scores were historically overcharged and that reducing the spread between these two groups of borrowers is merely restoring some equity to the charges, particularly since these lower scoring buyers will be required to provide PMI and property tax escrows.
One should also consider that the long-term fixed rate mortgages we benefit from in our country were a creation of the federal government based upon a policy decision that home ownership should be encouraged and expanded.
You won't find the kind of mortgages we enjoy here anywhere else as far as I know.
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Yep

For example there was a move to reduce the LLPA for higher LTVs loans to reflect the reduced risk due to the presence of MI.

*MI covers a percentage of loan losses when a foreclosure has been sold. A 95% LTV mortgage loan would have 30% MI coverage which reduces the potential breakeven point to around 67% LTV.
 
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