Well, good old Joe Biden and the Biden Administration are now bringing affirmative action to real estate. Maybe not directly, but to some extent. Yeah, there is now a new announcement out from the Biden Administration that listen to this: They are going to hike payments for good credit home buyers to subsidize higher risk, low-income minority borrowers. That's right.

So if you've done right with your finances, you have a higher credit score and a higher down payment. You're now going to have to pay a higher monthly payment to subsidize people who just didn't operate their finances as well. On one side, people are arguing hey, well In fairness, maybe you had the better opportunity to go to a better school because you were in a minority. On the other side, people are like f that I worked my ass off to get where I am and I shouldn't have to subsidize somebody else.

That's the government's job, not my job. Government shouldn't be making it more expensive for me to operate because somebody else didn't do as well. Well, that's exactly what's Happening Here Home buyers with good credit scores will soon encounter a costly surprise. The article speaks: Home buyers will be forced by a new federal rule to pay higher mortgage rates and fees to subsidize people with riskier credit profiles who are also in the market to buy homes.

Effective May 1 The Fhfa, the Federal housing and Finance Agency will push for more affordable housing and they will enact what are called loan level price adjustments to make it more expensive for you if you have a higher credit score. Here's basically how that works. Basically the way it works is usually when you go into a bank you might see something like this. You might see.

Okay, if you have a 740 credit score, we'll give you a rate of 6.5 Okay, you have a 720 credit score. We'll go ahead and give you the 625 or the 6.75 But we're going to go ahead and hit you with a low level price adjustment of 20 basis points, right? You have a 700. You might get that 6.75 plus 0.40 right? And this is usually the kind of metric and I'm making this this metric up, but this is just to make it simple math kind of what it looks like. when you go qualify for a loan.

Every 20 points your credit score is lower. You tend to have to pay a little bit more of an interest rate, and you either pay this in a higher interest rate or in higher points. So it's either rate or points. Points are basically the loan fees that you pay.

So these basis points could be part of your interest rate or they could be part of the points you pay and usually you get the best pricing at 740.. But basically what the Biden Administration is now trying to do is they're trying to distort the normal way this looks and they're basically trying to say hey, if you have like a 740 credit score and you're doing the right thing, you're putting 15 to 20 percent down. You were going to take those Rich borrowers and we're going to potentially charge them forty dollars a month on a 400k property, We're gonna give them a low level price adjustment. We're going to charge.

Whoops. We're going to charge those people more money. And as we charge these rich people so to speak, even though they could be first-time home buyers too who just got off on the right foot or or are trying to do the right thing, we're gonna charge them more money because that way we won't have to charge these people more money, who are more risky, who have a riskier credit profile, who should be paying higher rates because they're more risky. But the Biden Administration says no.

We don't want the free market to charge riskier borrowers more money. We're going to charge the safer borrowers more money because the riskier borrowers are more likely to be Black Or Hispanic and the higher credit profile borrowers are more likely to be white. So because we want more racial support and racial equity and we want to guarantee more equal results for people rather than just equal opportunity given that no matter what your race is, you have the Equal Opportunity of getting transparent pricing based on a higher credit score rather than letting the free market do its work the buy the administration would prefer to just charge richer, more predominantly white people more money and give that to the riskier borrowers. Now that's my explanation of it.

But let's just go ahead and see that example in writing from the the Uh the research piece here which has mortgage industry Specialists Say home buyers with credit scores of seven is 680 or higher will pay about forty dollars more per month on a home loan of four hundred thousand dollars. Home buyers who make down payments of fifteen to twenty percent will get socked with the largest fees. Now do keep in mind in my example, just to make it a little bit more clear, I have implied that 680 was closer to the bottom. Keep in mind you could buy a home all the way up to like a 600 and 580 and 620 credit score.

So maybe I should have drawn this all the way down here and basically said this, Whatever, it's the same thing. The point is, the higher credit score people and the ones putting 15 to 20 down, they're gonna pay the largest fees. The new fees will start for people who buy or refinance refinance as well after May 1. here it is an individual in the Bay Area who works for Bay Equity Home Loans Who says these changes don't make sense.

Penalizing borrowers with larger down payments and credit scores will not go over well. and it's also confusing to Borrowers And here's someone else. the President of the National Association of Realtors Uh, let's big position here. Who says in the wake of three percentage Point increases in mortgage rates, now is not the time to raise fees on any home borrowers and the Fhfa says that the fee will increase pricing support for borrowers limited by income or wealth.

They say the overall charge is minimal I Hate to say it, but every 40 bucks with how expensive things are, every 40 bucks is a little more than minimal. If you think about it, that's about 500 more per year. That's basically making home ownership more unaffordable. For the people who made sure they had the best credit score, the best income.

It seems like a slap in the face to people trying to do the right thing. The agency is also instead now going to delay a fee for people with higher debt to income ratios. So in other words, they're burning the candle at both ends of the stick. They're basically saying okay, people with higher debt levels were not going to charge them more money.

We're going to delay that fee until August for people with more debt and instead people with less debt, higher credit scores, and more down payment will charge them more sooner. So in other words, the goal here is to subsidize risky or riskier borrowers. Listen to these segments: The fee changes are intended to subsidize high-risk borrowers by imposing an intentional disruption to the traditional risk-based pricing. Exactly, It's the rich paying for the poor.

Why is it? And it's not even fair to call rich people. First time home buyers putting 15 down. They're not rich. That's just the way they're trying to cast it.

So maybe I should stop saying it. It's more the financially potentially capable versus the incapable I Don't know. Anyway, why was this done? The answer was simple: It was to try to narrow the Gap in access to credit, especially for minority home buyers who often have lower down payments and lower credit scores. I Wrote: this is basically affirmative action for housing.

You're basically saying, hey, if you're black or you're Hispanic or you're a minority to some Next Step You get easier access to home ownership and if you're white, you get worse access to home ownership which is basically what happens at comp or or should I say schools like Harvard or Ivy Leagues or a lot of colleges where colleges say hey, the test scores we require from a white male are higher than the test scores we require from a blackmail. Okay, the thesis is that that should be sort of a way to repay for prior struggles. Uh, that. uh, black families Or Hispanic Families may have had because maybe they grew up in a more poverty-stricken area which had worse schooling, worse opportunities for jobs, worse internships, worse job growth opportunities, or mentorship opportunities worse.

Financial Education My response to that is all of our schools mostly suck. Most of them should be revised with substantial Financial education. And rather than trying to fix the problem here, why don't we go to the Root Cause? And rather than screwing up the economy, why don't we go to the Root Cause and start actually spending more to fix our schools by instituting Financial education programs in all of our schools. But start with the poorest, fix the schools in the poorest areas first, then introduce more financial education.

The poorer areas start actually fixing the root cause rather than trying to bandage the problem. But no, no, the government would rather do this. She once again is backwards, but it's probably a way of attracting voters and the Democratic base. Anyway, the Gap in Home Ownership opportunity is real Is the argument on one side that hey, maybe this will help lessen the gap between home ownership.

And it's true: white individuals own substantially more homes than black individuals. Black individuals are much more likely to be tenants than white individuals. And unfortunately, when it comes to net worth, we know this because I teach it on my channel regularly and I have courses on building your wealth specifically zero to millionaire real estate investing. We know that the average net worth of a tenant is somewhere around 180 or sorry.

uh, the average net worth of a homeowner is somewhere around 180 000, whereas the average net worth of a tenant is somewhere around a paltry five thousand six hundred dollars. So you have a massive disparity between net worth between homeowners and tenants. and unfortunately, uh, home ownership is Out Of Reach for some folks because of their jobs, their debts, their credit scores or otherwise. But the Biden administration's solution here seems to be to reward poor financial decisions rather than going to the root cause of the problem.

maybe providing more opportunities in school and more education for people in school than trying to bandage the problem like this, which just ends up creating more disparities in the free market economy of home ownership. In other words, people who are saving more money shouldn't be punished for having a better credit score and having saved more money than individuals who have a worse credit score. It seems backwards. It actually feels anti-American To say that the people who worked the hardest to have the best financial standing should pay the highest fees feels backwards.

But then again, the other side is making the argument that, well, In fairness because of like affirmative actions style policies, this is what we want to do. That's what the Biden Administration is up to. So think about that and take it for what you may.