CORRECTION

Anthony Lamacchia: Hey everybody. Yesterday when I did that video in the morning, I talked about the cost of mortgages and how they were going up as of May 1st for those with higher credit scores. It’s pretty much to make up for those who had lower credit scores. What I talked about in my video was how I thought we got that to stop. I thought that was put in place May 1st and last week on about May 9th. I thought that was completely repealed and I misunderstood. I wanted to come on here and film this video and get it out as a correction and I wanted to own it. I’m not going to go erase the video and put out written statements. I just wanted to come on camera and tell you all that I made a mistake on that.

I should have been more clear on that detail. There is part of it that changed and that’s why instead of me getting into all those details, I wanted to bring the ultimate mortgage expert, Mr. Shant Banosian, from Guaranteed Rate Mortgage number one mortgage broker in the country, who is going to help us break this down and make sure I don’t put my foot in my mouth again. All right, folks? Shant, what happened?

Shant: What’s up everybody? Thanks for having me. Happy to talk about this. There’s two parts to what was going to effect on May 1st. Some of it is already in place. Some of it was repealed. The part that’s still in place Fannie Mae, Freddie Mac decided to come out with a policy to help underserved borrowers in their opinion. They wanted to create more housing affordabilities, home prices have gone up and rates have gone up. They wanted a lower borrowing cost for people with lower down payments and lower credit scores. Fair enough. Sounds good. Make sense for a lot of people.

However, what they did was, at the expense of people with higher down payments and higher credit scores, they took some of the pricing away there and gave it to lower down payments.

Anthony: Made it a little more expensive for those with higher credit.

Shant: Made it a little bit more expensive for those with higher credit and higher down payments, less expensive with lower down payments and lower credit scores. However, just to be clear, people with bigger down payments and better credit scores still get better interest rates and have more affordably than those with less. There were some misconceptions around this, that’s done. The second part to it was, there was a debt-income ratio adjustment. There’s a 40% debt-income ratio adjustment that created a lot of panic within the mortgage industry. It was a couple of things. One, what it was the proposal was, if somebody has a debt ratio higher than 40%, then there’s an additional price adjustment.

It actually was going to make, things more expensive for people with lower incomes. It was contradictory to their message about helping underserved borrowers. There was that one piece. The other part of it was a compliance nightmare. Income’s changing all the way up until the end. Whereas with like FICO Score and down payment, that’s pretty set in stone. If somebody changes their down payment, that’s their decision. With income, you have an underwriter that’s working up, a loan processor, things are changing to figure out how the way to do this fair right up until the day before closing could result in a either higher price for a borrower or a penalty for the lender. It got delayed till August 1st.

Anthony: That’s right. Then what?

Shant: Then it got repealed.

Anthony: Correct. That’s the part that I want to clarify. Last week I heard from several people who said, “They repealed it, they repealed it.” I’m usually very good at verifying all of this stuff on my own by looking at the guidelines or if it involves mortgage, I usually talk to him first. There’s a confession for you all to know, I didn’t do either. I just put the video on because if you watched my video from yesterday, I was making it more about all of the incredible work that our National Association of Realtors does for both realtors and private property rights, homeowners, et cetera.

Remember, homeowners don’t have any association representation, but NAR essentially does that on their behalf of all buyers and sellers across the country. If you watch my video, it was 90% about that. The first 10% was my mentioning of this, and a couple of mortgage brokers corrected me on it. By the end of the day, I said, “Wait a second, maybe I made an error here.” He was at the Celtics game. I texted him and he’s like, “Yes, yes, you made an error.”

I wanted to get on here and talk about this. I want to clarify a couple of things. What everybody has been making noise about and has been mad about since about five days before May 1st, is still in place.

Shant: Yes. Absolutely.

Anthony: I also want to clarify, I know Shant, we have no problem with banks doing things. Fannie, Freddy, FHA, whoever, doing things to make purchasing a home more affordable for lower-income borrowers. We have no problem with that. In my opinion, it should not be happening at the expense of higher credit borrowers. That’s what’s gone into place and that I disagree with. Anyone watching, if you want to send this to FHFA, I certainly don’t mind. I don’t know if you do.

Shant: Yes, me neither.

Anthony: He may, but I don’t.

Shant: I’d say there’s a lot of talk. I know FHFA I’ve seen a lot of our news articles that they’re talking and reaching out to lenders, getting their opinion on it. I know that there’s many states that are opposed to this and wanting further clarification. I don’t think this is a done deal yet.

Anthony: They’re getting a lot of pressure.

Shant: It’s in effect right now. It’s gotten a lot of attention. It’s gotten politicized. It’s a lot of these things. I think there’s more to come on it. I don’t think this is– Again, today it’s in place, that doesn’t mean they’re not going to make adjustments inn the future.

Anthony: The head of the FHFA, I’ve met her, she’s a very nice person. She works very hard to run a good organization there. I saw that she put a comment yesterday saying, “We’re taking public comments. If you have feedback, send it to us.” I think you’re right about that. Last thing I want to clarify, you mentioned how it got political. A lot of these articles I’m reading and a lot of people are believing them, are saying, they’re making it, “Oh, this is how it happened. Making it so much easier for people with bad credit to buy.” I don’t agree with that. I don’t think this guideline did that. Do you agree?

Shant: No. Yes, I totally, 

Anthony: This is a cost difference. There’s no guideline that changed here.

Shant: It’s a minimal cost difference. It’s not all of a sudden you’re not going to flood the market with people that don’t deserve  house. Guidelines are tighter than ever, credit’s tighter than ever. Verification’s more accurate than ever. People that are getting mortgages, no matter what their credit scores are, if they’re obtaining a Fannie Mae, Freddie Mac, they’re actually qualified. Everything’s been verified, and they’re good borrowers and they’re creditworthy.

Anthony: Folks the next time I’m going to put out a mortgage-related video, I’m just going to do this from the start.

See you soon everyone. Good luck. Happy home selling.