In an effort to balance the housing market, President Joe Biden is asking homeowners with excellent credit to foot the bill. According to Fox Business, beginning in May, a new government tax will require Americans with excellent credit to support high-risk borrowers with their new mortgages. Proponents argue that the change would make housing more accessible for everyone, while opponents argue that the new charge will only penalize those who act ethically.
Joe Biden Wants You To Pay a ‘Fee’ To Give Loans to People with Bad Credit https://t.co/IpbqfQUBz1— Vicki Bailey (@VickiBa22930572) April 23, 2023
Lenders like Fannie Mae and Freddie Mac are granting “loan-level price adjustments” to offset the increased risks associated with low-income purchasers as part of the administration’s drive to promote affordable housing. According to the Washington Times, the revisions would impact homebuyers with credit scores above 680 and those who put down 15%-20% on a property. A $400,000 mortgage would now cost an extra $40 per month, on average, as a result of these alterations.
To put it another way, those who have done the most to expand access to house ownership will now be expected to vouch for the mortgage-ineligibility of individuals with lower credit ratings. Building positive credit takes time, effort, and persistence. Good credit history can take years to create, and that time is spent paying bills on time and keeping expenses down to a minimum. Lenders may be assured that they will be repaid on a regular basis because of their solid track record. This new approach would do away with all of that, providing the same opportunities to those whose credit ratings have fallen.
The Washington Times quotes Ian Wright, a senior loan officer at Bay Equity Homes in San Francisco, as saying, “The changes do not make sense” and “will not go over well.” According to him, the folks behind this latest move “don’t understand the entire mortgage process,” especially given how hard it is for buyers, lenders, and the industry as a whole to avoid a collapse right now.