President Joe Biden (D) and his administration recently announced a new plan that looks to reward homeowners with lower credit scores by penalizing those with higher ones. Senator Rick Scott (R-FL) and other Senate Republicans have voiced their displeasure with this plan, as it comes across as a way for the government to unfairly redistribute wealth.
The Federal Housing Finance Agency (FHFA), which oversees the majority of mortgages in the United States announced that those with a FICO credit score below 620 will receive a discount on their fees, while simultaneously granting a monthly fee on those with a credit scores higher than 740.
One of the main causes of the house market crash in the late 2000s was banks accepting those applying for mortgages with risky, low credit scores, and granting them gargantuan loans.
Mortgages were viewed as a safe risk, because “who wouldn’t pay their mortgage?” Those same banks that granted those risky loans went bankrupt and were bailed out by the federal government.
Sen. Scott alongside Sens. Roger Marshall and Thom Thills and others, wrote to the Director of the FHFA Sandra Thompson, to provide their scathing reviews of the new plan.
“This shortsighted and counterproductive policy demonstrates a profound misunderstanding of the necessity of accurately tailoring housing finance products to credit risk and establishes a perverse incentive that punishes hardworking Americans for their fiscal prudence,” the letter said.
“Under your leadership, FHFA has pushed forward a number of policy proposals and changes that seek to social-engineer the U.S. housing market in ways that increase riskiness and promote discrimination…The fact that a proposal flaunting credit risk is being openly pushed by FHFA just a decade-and-a-half after the housing-led 2008 financial crisis is staggering…The housing market should not be exploited as a means to pander to targeted demographics that you have chosen, nor an instrument to secure political favoritism.”
Representative Brian Mast (R-FL) made his thoughts known as well, stating that the move to reward lower credit scores is “blatantly un-American.”
“Closing the homeownership gap is a good goal, but doing so on the backs of hardworking individuals who have managed their money responsibly isn’t the way to do it. It’s big government at its worst - punishing success by taking more out of people’s wallets,” stated Rep. Mast.
The FHFA’s plan began on May 1st.
