The Biden administration’s Federal Housing Finance Agency (FHFA) is being accused by Senate Republicans of playing politics with the U.S. housing market and putting individual homebuyers and the entire market in danger.
In a letter to FHFA Director Sandra Thompson, Sen. Roger Marshall, R–Kan., and 17 other GOP senators warned that the agency’s decision to force people with good credit to subsidize high–risk mortgages will have a damaging effect on the housing market.
“This announcement, scheduled to take effect May 1, 2023, will invert the common–sense risk financing structure at the GSEs in an effort to decrease mortgage rates for riskier individuals with low credit scores and forcibly raise rates for those with higher scores,” the senators wrote.
Experts have said that under the rule, people with credit scores in the neighborhood of 680 might pay another $40 more per month on a $400,000 loan to subsidize higher–risk mortgages. Sen. Marshall called the move “illogical” and said it “penalizes hardworking Americans for their fiscal prudence.”
The senators also said that the rule “brazenly contradicts” current financial principles and asked whether any cost–benefit analysis has been done on how the rule change might affect the housing market, and whether a formal notice–and–comment period had been held to allow for public input.
The policy has also attracted criticism from Democrats. President Obama’s former Federal Housing Administration commissioner David Stevens said, “We can do better programs to help more minorities get into homeownership. This is not the way to do it.”
The senators further warned that FHFA has “tried before to social–engineer the U.S. housing market” and that this latest attempt “seems aimed at making high–risk borrowers more comfortable with homes that are out of their price range.”
The letter concluded by saying that the housing market “should not be exploited as a means to pander to targeted demographics” and demanded details on how the policy decision was made. This could be a sign that the legality of the move could be challenged.
The Biden administration is facing mounting criticism over its handling of the U.S. housing market, with Republicans accusing the administration of putting individual homebuyers and the entire market in danger. The future of the policy remains uncertain and the legality of the move could be challenged in the near future.