By CASEY HARPER | THE CENTER SQUARE
A new federal rule that would charge higher fees to home buyers with good credit to help subsidize those with poor credit goes into effect Monday.
The Federal Housing Finance Agency announced in January it would increase Loan-Level Price Adjustment fees for mortgage borrowers with higher credit scores to help keep fees lower for those with worse credit.
Director Sandra Thompson of FHFA said the plan will “advance their mission of facilitating equitable and sustainable access to homeownership.”
The loan-level price adjustment is a fee assessed after bankers evaluate the risk of lending them money. The FHFA rule could cost those with better credit scores thousands of dollars on their loans, effectively punishing them for paying their bills.
Critics argue the rule shifts risk costs onto borrowers with better credit and will leave taxpayers on the hook if the plan leads to major economic issues.
The rule has sparked a wide array of controversy, especially as critics point out Freddie Mae and Freddie Mac engaged in similar policies in their role in the 2008 financial crisis. That crisis put billions of dollars in financial burden on taxpayers via government bailouts.
Critics called the rule a “bailout” for those with poor credit, comparing it to student loan forgiveness.
“Rather than saddle those with scores 680 or lower with more debt, it’s far better to encourage them to re-establish credit,” Joel Griffith, an economic expert at the Heritage Foundation, told The Center Square. “Most people find themselves financially strapped at some point. A few years of consistent timely payments and debt paydown can help someone even emerging from bankruptcy attain scores at 680 or worse with a near 0% loan from FHA.”
Griffith also said the plan would drive up home prices, especially for starter homes, which are already experiencing the highest housing inflation.
Other critics argue this is part of a pattern in the Biden administration of using regulations to take from some and give to others.
“This mortgage rule is part of a pattern of Biden administration policies that force responsible consumers to subsidize irresponsible ones – from blanket student loan forgiveness that disregards those who already paid to the CFPB’s price controls on credit card late fees that would force those cardholders who pay on time to pay more,” John Berlau, director of Finance Policy for the Competitive Enterprise Institute, told The Center Square.
In response, U.S. Rep. Andy Biggs, R-Ariz., introduced the the Responsible Borrowers Protection Act last week. Biggs’ measure would block the rule from going into effect, but will almost certainly not be passed before Monday if at all.
“The FHFA – led by a President Biden appointed director – is punishing financially responsible mortgage borrowers,” said Biggs, who has more than 30 lawmakers backing his bill. “Their agenda of equity over equality defies common sense and will endanger the stability of the housing market.”
Casey Harper is a Senior Reporter for the Washington, D.C. Bureau. He previously worked for The Daily Caller, The Hill, and Sinclair Broadcast Group. A graduate of Hillsdale College, Casey’s work has also appeared in Fox News, Fox Business, and USA Today.
A “rule” designed to cause another bank crises in 3 to 5 years.
We have spent years on making our credit good. We are being punished for that because of government overreach. I was in banking when they did it the last time. So many loan defaults and the amount of time wasted…and to charge those who DON’T default, along with taxpayers footing the bill, is highway robbery.
Doing the same thing over and over again and expecting a different result…….
Can’t help but remembering the story of the professor who grade averaged his students as an experiment for a year.
Top students gave up trying knowing their diligence and hard work was just distributed amongst the party animals
Ah, Bidenonmics. Also know as vote pandering socialism.
If this gets through, it will set the stage for an even bigger bank collapse than 08. Why? We’ve taught the mega banks we’ll bail them out.
Yes! ?
Biden has consistently managed to put into practice those famous words of a previous president:
“Ask not what your country can do for you, ask how you can destroy your country.”
Sadly, that president would be a MAGA republican by today’s standards.
Yep, redistribution of wealth…. again. Just wait until it dawns on one of those geniuses to charge a “compassion fee” to all those homeowners/buyers/property tax payers with great credit to finance all those ” tiny homes” for the homeless……
Delusion towards psychosis continues with the president.
Equitability is the process of standards for functionality, learning delayed gratification, and fiscal management, not delusional bail outs. Denying and depleting the responsible citizen to avail the fiscally overextended or challenged citizen is not an incentive for either. The responsible will not want to try rather learn to be helpless and the fiscally challenged will succumb to not trying nor plan for the future. This strategy of learned helplessness has been used for centuries to conquer and control people by dictating leaderships. Let’s “give a hand up,” which requires the recipient to show effort too by reaching out for the hand.
This past week I, at the age of 65, paid off my student loans for multiple graduate school degrees. I appreciated the “hand up” to contribute in our community as a responsible resident, professional, leader, and Alaska legislator. I also appreciated being fiscally responsible to pay back the “hand up” with interest.
Sad state of affairs when Americans, with good reason, expect only bad things from Mr. Biden’s administration…
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The rule hardly seems like a show stopper. Home prices can be reduced to absorb the extra expense. The extra expense may be tax deductible. Credit scores can be creatively adjusted to circumvent the magic number.
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A Senate resolution could specify that no appropriated funds be used to enforce the rule. President Trump could cancel it after his election.
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Sad state of affairs when Americans’ fiercest competitor seems to be their own goverment…
Just more normalization of the absurd.
To me this is discrimination. Why do people who work hard and sacrifice to raise their standards have to pay for those who go through life happy go lucky? I do not need to help someone pay their mortgage. What happens if I sell and quit paying a mortgage do they loose their house? It’s time to draw a line in the sand with the feds continuing to attack successful people. Let’s just give everybody a house and car and toys for free. Where are the lawyers?
Survival of the weakest.
…and pssst; it’s Fannie Mae and Freddie Mac.
Maybe we should just give everyone a home if they qualify for the property taxes.
What part of home equity don’t you understand? Not that it matters because nobody will get a loan during a credit crunch
In case anyone needed more proof that liberals are a bunch of maroons.
Unfortunate America today has forgotten its hard-won past, risking its future !
“Where justice is denied, where poverty is enforced, where ignorance prevails, and where any one class is made to feel that society is an organized conspiracy to oppress, rob and degrade them, neither persons nor property will be safe.”
― Frederick Douglass
Very unreasonable business approach. One world order directing America from Davos via our “elected”(?) Public servants. Who do they work for and represent? Capitalism? Our Republic? Several foreign monarchs?
Certainly not the people of the US.
This is textbook baby steps toward communism. They chip away then, over time, its forgotten by the sheep.
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