CRN Nevada

Low Credit Score


We are hearing a lot of talk and seeing a lot of articles regarding the new Federal Housing Finance Agency (FHFA)  mortgage structure that went into effect this month. As you are probably hearing, the reviews on this program are wide and varied as it rewards consumers with lower credit scores.   The Biden administration has said that the new structure aims to simplify the mortgage process and make it easier for homebuyers to qualify for a loan. The new structure will impact loans purchased by Fannie Mae and Freddie Mac, two of the largest mortgage lenders in the United States.  If you are a non-Fannie Freddie borrower this rule doesn’t affect you.  

The big question however, and what is creating so much in the way of opinion on both sides of the argument is that those that have worked hard to achieve a good credit score are now being told it doesn’t matter.  

In this blog, I’ll  take a closer look at the 2023 FHFA mortgage structure and what it means for homebuyers and the housing market, including those here in Southern Nevada.

What is the 2023 FHFA Mortgage Structure?

Under the 2023 FHFA mortgage structure, Fannie Mae and Freddie Mac will no longer require a 20% down payment on all loans. Instead, borrowers will be able to purchase a home with as little as a 3% down payment. This change is expected to make homeownership more accessible to low- and moderate-income families.

Additionally, the FHFA is introducing this new fee structure, which is now in place for all borrowers. 

Instead of charging fees based on the loan-to-value (LTV) ratio, as was done under the previous structure, the new fee structure will be based on credit risk.

Here is where we are seeing push back.  Borrowers with a higher credit score will pay lower fees than those with a lower credit score.

The new fee structure will also eliminate the adverse market fee that was implemented in 2020 to offset the financial impact of the COVID-19 pandemic.

How Will the 2023 FHFA Mortgage Structure Impact Homebuyers?

The 2023 FHFA mortgage structure is expected to make homeownership more accessible to low- and moderate-income families by lowering the down payment requirement to 3%. This will make it easier for first-time homebuyers to enter the housing market.

The new fee structure, which is based on credit risk, is also expected to benefit borrowers with a higher credit score by reducing their fees. Borrowers with a lower credit score may face higher fees, but the elimination of the adverse market fee will offset some of these costs.

Overall, the 2023 FHFA mortgage structure is expected to benefit homebuyers by making it easier to qualify for a loan and reducing some of the costs associated with homeownership.

My personal opinion, and the opinion that we are hearing a lot is that rewarding those with a lower credit score is wrong. Why not take the opportunity to reduce fees there as well?

While I am pro-consumer, helping people repair their credit is our business–I do think that there is a fine line.  I wonder like many, have we crossed that line?

This program is brand new and  the full impact of these changes remains to be seen, it is clear that the 2023 FHFA mortgage structure represents a step towards a more accessible and equitable housing market, the concept of rewarding those with poor scores and punishing consumers with higher scores seems wrong.

About Harry Jacobs:

Harry Jacobs is the Founder of Credit Restoration of Nevada. (small picture to the left of that) he is widely regarded as one of the experts in the field of credit, credit repair and credit restoration. His knowledge of Fair Debt Collection Practices and the Fair Credit Reporting Act make him a tremendous resource for consumers and consumer law firms.