Now he’s coming for your home loan. The Biden Administration’s “whole-of-government equity agenda” has reached America’s home buyers, and as could be expected, it turns fairness on its head. Beginning in May, the Federal Housing Finance Agency (FHFA) changed the loan fees charged to Americans with new mortgages backed by Fannie Mae and Freddie Mac, which back about 60% of all mortgages in the United States. (America’s taxpayers, in turn, backstop the financial commitments of Fannie Mae and Freddie Mac.)
The new fee structure pairs an increased rate for home buyers who have worked hard to obtain good credit scores, while reducing the rate for those who have low credit scores. (This includes affluent people with low credit scores.) It also increases fees for those who make larger down payments, while reducing the fees for those who make small down payments. In both cases, the new fee structure punishes those who are lower risk borrowers, subsidizing those who are more likely to default.
Let’s face it: “equity” does not mean equality; it means socialism. The new fee mandate is effectively a tax increase for those who pay their debt commitments on time, many of whom forego buying items they would like to buy precisely to achieve and maintain a high credit score. But it also puts in place policies that are widely recognized as key causes of the Great Recession: encouraging those most likely to default to take on more mortgage debt than they otherwise would. In short, the Biden Administration is punishing those who pursue the policies that should be encouraged, and subsidizing those who behave less responsibly, all the while recreating conditions that contributed to the worst recession since the Great Depression. And doing it while mortgage rates are rising and high inflation persists in reducing the buying power of the American people.
It is no surprise that this foolish new policy has been criticized by many on both sides of the aisle, including President Barack Obama’s former Federal Housing Administrator. I joined more than 40 of my colleagues in sending a letter to FHFA’s Director, Sandra Thompson, urging her to evaluate how this rule will impact American homeowners and to reconsider the implementation of the rule. Many Americans work hard to save money and build good credit scores so that they may purchase a home. President Biden is penalizing these families by taking more of their money and using it to increase risks to our financial system. The administration should instead be implementing policies that will reduce inflation, cut energy costs, and thereby lower interest rates so that more Americans can afford to buy a home.
