President Biden has repeatedly rejected the traditional American principles of meritocracy and opportunity in favor of the nebulous push for “equity,” aka equality of outcome. The latest incarnation of this shift comes via the Biden administration’s new rules for mortgage fees that will punish the responsible and reward the reckless.
Here’s what’s going down.
“A new rule will raise mortgage fees for borrowers with good credit to subsidize higher-risk borrowers,” the Wall Street Journal reports. “Under the rule, which goes into effect May 1, home buyers with a good credit score over 680 will pay about $40 more each month on a $400,000 loan, and upward depending on the size of the loan. Those who make down payments of 20% on their homes will pay the highest fees. Those payments will then be used to subsidize higher-risk borrowers through lower fees.”
This is a terrible idea, and here are 3 reasons why.
The housing market is already struggling
The real-estate market is already struggling right now, with home sales down significantly thanks to rising interest rates that are making buying a home much more expensive. That means it’s the worst time to add new rules that make it more expensive to buy a home. And it’s not just right-wing activists and conservative media saying this.
“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,” said former Obama administration housing official David Stevens. “To do this at the onset of the spring market is almost offensive to the market, consumers, and lenders.”
This rule makes responsible people pay for irresponsible people
Biden’s new rule is fundamentally unfair. If you’ve made responsible decisions and have a good credit score, you will now be punished—to the tune of thousands and thousands of dollars over the lifetime of your mortgage—to bail other people out of the consequences of their poor decision making that’s led them to have a poor credit score. That’s an insult to hardworking Americans and a boon to those who don’t deserve it.
Further encourages people to buy houses they can’t afford
We need look no further than the 2008 financial crisis to see what happens when you make it easier for people to get a mortgage who can’t actually afford to buy a house or be trusted to pay back a mortgage. That’s exactly what this fee system does, however. As the Journal notes, “This is the socialization of risk, and it flies against every rational economic model, while encouraging housing market dysfunction and putting taxpayers at risk for higher default rates.”
All in all, it’s a terrible idea. And, unfortunately, it’s part of a broader pattern. On everything from so-called student debt “cancellation” to Affirmative Action, the Biden administration is siding against American meritocracy and endorsing radical redistributionism.