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Comment by evancox100 | Hacker News Reader

The current headline, “The Better Your Credit Score the Higher Your Mortgage Rate” is not true. The LLPA (Loan Level Price Adjustment, the amount Fannie Mae charges essentially) decreases monotonically with increasing credit score. So higher credit score borrowers will still pay less than lower credit score borrowers.

From [1]: "'Overall, lower-credit buyers will still pay more in LLPA fees than high-credit buyers – but the latest changes will close the gap,' notes the Post."

What they have done is significantly lowered the spread between high- and low-credit score borrower, by increasing the fee charged to the former and decreasing the fee charged to the latter.

[1] https://reason.com/2023/04/21/borrowers-with-high-credit-sco...

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"Under the new matrix, borrowers with high credit scores will face higher mortgage fees __than before__ and those with lower credit scores will face lower fees."

The submission title should be "Fannie Mae New Rule: The Better Your Credit Score the Higher __the increase in__ Your Mortgage Rate"

HN limits submission titles. I couldn't fit "Increase " into the end of the title. But if @dang wants to make the title more clear then I'd welcome that.

So it’s really an issue of imprecise title, but the issue is still highly immoral and likely illegal based on the taking clause and the highly discriminatory and unequal nature, regardless.

The title should have been more like about how the fees, i.e., marginal rates, for higher risk borrowers is being charged to lower risk borrowers. No moral or ethical person could support this, regardless of benefit of penalty. It is indefensible, short of making it voluntary so all the virtue signalers can choose to put their money where their mouth and self-righteousness it. It is still a system to punish good and reward bad.

> but the issue is still highly immoral

With reference to what specific system of morality?

> and likely illegal based on the taking clause

How on earth are LLPAs, under any price schedule, a taking under the 5th? Preferably, with citation to relevant authority.

> and the highly discriminatory and unequal nature

All laws are discriminatory, but except when certain protected bases of discrimination or certain important rights are implicated, that discrimination only needs to meet the very deferential standard of being rationally related to a legitimate government purpose to be Constitutionally permissible.

I'd be interested in hearing whether (and, if so, why) you think a standard beyond rational basis review is applicable here and, more critically, your argument for how the applicable standard of review is not met.

Fannie Mae's matrix is (IMO) intentionally misleading to hide the disproportionate rate increases. Here is a normalized chart showing the rate increases [0].

[0]: https://mishtalk.com/.image/c_limit%2Ccs_srgb%2Cq_auto:good%...

So now that the affordability range for mid-and-high-tier earners is depressed, they’ll be encouraged to buy cheaper houses, thus increasing demand for the lower-end market and making it even more difficult for those with poor credit to buy a house.

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