As a conservative blogger and a firm believer in free-market principles, it’s concerning to learn about the Biden administration’s latest move that will force good-credit home buyers to pay more for their mortgages to subsidize loans to higher-risk borrowers. According to a report by The Washington Times, a new rule from the Federal Housing Finance Agency (FHFA) will come into effect on May 1st that will increase the monthly mortgage costs for those with a credit score of about 680.
Under these new rules, borrowers with good credit scores and larger down payments will be penalized, and their monthly mortgage payments will increase by approximately $40 on a $400,000 mortgage. This cost will help subsidize people with lower credit ratings who are also looking for a mortgage.
This move by the Biden administration is not well-received by experts and industry professionals. Ian Wright, a senior loan officer at Bay Equity Home Loans, stated that “penalizing borrowers with larger down payments and credit scores will not go over well.” He also added that this new rule will “overcomplicate things for consumers during a process that can already feel overwhelming.”
David Stevens, a former commissioner of the Federal Housing Administration during the Obama administration, also criticized the new rules, stating in a social media post that “this confusing approach won’t work and more importantly couldn’t come at a worse time for an industry struggling to get back on its feet after these past 12 months.” He further added that “to do this at the onset of the spring market is almost offensive to the market, consumers, and lenders.”
The housing market has already been struggling due to multiple interest rate increases by the Federal Reserve. This new rule will only add to the confusion and complexity of the home-buying process. The FHFA’s goal is to help borrowers with lower credit ratings and less money for a down payment qualify for better mortgage rates. However, the unintended consequence is to punish those who have worked hard to maintain a good credit score and a larger down payment.
As usual this Biden rule is designed to redistribute (i.e. steal) from financially able home-buyers with good credit to pay for high-risk loans. How about the idea of not buying if you can’t afford?https://t.co/JKcF04aFZb
— James Hutton (@JEHutton) April 20, 2023
In conclusion, the Biden administration’s new rule penalizes good-credit home buyers and overcomplicates the already overwhelming process of buying a home. It’s an approach that doesn’t make sense and could have unintended consequences for the industry, consumers, and lenders. The housing market needs stability and certainty, not confusion and complexity.