State treasurers and other top finance officials from 27 US states have called on President Biden to immediately end his “unconscionable” policy of forcing people with good credit scores to subsidize mortgage loans of higher-risk borrowers.
The officials criticized Biden’s plan, which was outlined a few weeks ago by the Federal Housing Agency (FHFA) and is set to take effect today, as a disaster. The plan seeks to help low-income borrowers afford their monthly mortgage payments by requiring people with good credit scores to pay more each month for their mortgages, with the extra payments being credited to the loans of higher-risk borrowers.
In a letter to Biden and FHFA Director Sandra Thompson, the state finance officers said that the policy would be a middle-class tax hike that will cost American families millions of dollars. The policy, they argued, will further depress home sales at a time when the real estate market has already slowed considerably due to high-interest rates. They urged Biden to take immediate action to end this policy.
The officials said that the policy would hurt people who make sound financial decisions, including millions of hardworking, middle-class Americans who built a good credit score and saved enough to make a strong down payment. They noted that those who make down payments of 20 percent or more on their homes will pay the highest fees – one of the most backward incentives imaginable. The forced extra payments will be used to hand out better mortgage rates to people with lower credit ratings, they added.
The state officials emphasized that expanding homeownership is a worthy goal, but they argued that the forced subsidization of risky loans is not the way to achieve it. They suggested that the right way to solve the problem is to implement policies that will reduce inflation, cut energy costs, and bring lower interest rates.
The letter was signed by treasurers, auditors, commissioners of revenue, and other top officials from Alabama, Alaska, Arizona, Arkansas, Florida, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Nebraska, Nevada, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Texas, Utah, West Virginia, Wisconsin, and Wyoming. The policy has been criticized by both Republicans and Democrats, including President Obama’s former Federal Housing Administrator.