A new Federal Housing Finance Agency policy that took effect Monday “will have the net effect of making it significantly more expensive for people with good credit to buy houses,” according to almost three dozen state financial officers.
Thirty-four state financial officers shared their “deep concern with the new Federal Housing Finance Agency policy” in a letter sent Monday to President Joe Biden and Sandra Thompson, director of the Federal Housing Finance Agency. The agency announced the policy in January.
“This new policy will force homebuyers with good credit to pay more on their mortgage every single month,” the letter says. “In other words, the policy will take money away from the people who played by the rules and did things right – including millions of hardworking, middle-class Americans who built a good credit score and saved enough to make a strong down payment.”
“For decades, Americans have been told that they will be rewarded for saving their money and building a good credit score. This policy turns that time-tested principle upside down,” the letter adds.
“It is already clear that this new policy will be a disaster,” the letter also said.
Alabama Auditor Andrew Sorrell, Florida Chief Financial Officer Jimmy Patronis, Iowa Treasurer Roby Smith, West Virginia Treasurer Riley Moore, and Utah Treasurer Marlo Oaks signed the letter, among others, under the leadership of Pennsylvania Treasurer Stacy Garrity. All signatories are Republican.
“This new policy makes it more expensive for people with good credit to buy houses – and that’s absurd,” Garrity told The Daily Signal in an emailed statement. “Americans who have built a good credit score and saved enough to make a strong down payment should not be penalized and forced to pay more on their mortgage every single month.”
“I’m proud that so many of my colleagues from across the country – representing a majority of states – have united to urge the immediate elimination of this policy,” Garrity said.
Other signatories of the letter include Alaska Commissioner of Revenue Adam Crum, Arizona Treasurer Kimberly Yee, Arkansas Auditor Dennis Milligan, Idaho Treasurer Julie Ellsworth, Indiana Treasurer Dan Elliott, Kansas Treasurer Steven Johnson, Kentucky Treasurer Allison Ball, and North Carolina Treasurer Dale Folwell. State financial officers from Louisiana, Mississippi, Missouri, Nebraska, Nevada, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Texas, Wisconsin, and Wyoming also signed the letter.
“A misconception about the latest [loan-level price adjustment] changes is that good credit score borrowers will be penalized or otherwise subsidize mortgages for lower credit score borrowers,” Adam Russell, senior communications specialist at the Federal Housing Finance Agency, told The Daily Signal in an emailed statement. “This narrative is inaccurate because borrowers with higher credit scores pay lower [guarantee fees] than borrowers with lower credit scores as shown in the pricing grid before May 1 and after May 1.“
“Higher credit score borrowers will pay less in fees compared to those with lower credit scores,” Russell added. He also cautioned “against making broad generalizations about the pricing framework.”
As displayed in the pricing grids linked above, there is no “one size fits all” [guarantee fee]. These are loan level pricing adjustments and are applied to borrowers on a case-by-case basis depending on their specific financial situation.
In addition, not all homebuyers will be affected by these [loan-level price adjustments] because the fees (and the fees announced in the 2022 pricing announcements) only apply to homebuyers whose mortgages will be backed by Fannie Mae or Freddie Mac.
Russell also noted that “[t]oday’s pricing update does not apply to homebuyers whose mortgages will be backed by a private institution or backed by HUD/FHA, the VA, or the USDA.”
Will Hild, executive director of Consumers’ Research, also weighed in on the policy, labeling it “a slap in the face” to Americans who played by the rules.
“This new policy by the Biden administration is a slap in the face to every consumer in the nation who worked hard to develop a good credit score,” Hild said in a statement. “Forcing them to subsidize lower scored buyers adds insult to the injury of the higher fees they are now required to pay.”
“This is the latest in a disturbing pattern of Biden’s big government intervention into the lives of hard-working Americans in order to push his progressive social agenda,” Hild said. “Under Biden, the economy is in shambles and policies likes this aren’t going to save our country from spiraling out of control.”
Instead of working to reduce the out-of-control inflation his policies created that is contributing to lower credit scores for many borrowers, Biden has chosen to divide Americans by pitting them against each other during the home buying process.
The White House did not immediately respond to The Daily Signal’s request for comment.
“This new Federal Housing Finance Agency policy punishes hard working Americans who saved and sacrificed to build strong credit,” Derek Kreifels, chief financial officer of the State Financial Officers Foundation, said in a statement. “Higher-risk borrowers will be subsidized by these fees imposed on the middle class, turning sound financial principles on their heads.”
“We will do everything in our power to support states as they protect the middle class from this sort of misguided big government interference,” said Kreifels.
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