Blaine’s Bulletin: Biden Mortgage “Equity” Plan
Washington, April 28, 2023
A major theme we have seen with the Biden Administration is “equity.” In fact, that is a term we often hear spouted from the media and political left. A word we very rarely hear these days is “equality.” While they seem similar, the two words have very different meanings. When it comes to public policy, equality means everyone is treated the same under the law – the laws that apply to you also apply to me and everyone else in America. How you live your life under those laws is up to you. Equity on the other hand means regardless of the decisions you make and actions you take, the government is going to skew the law to ensure you and your neighbor who made completely different decisions receive similar outcomes. For example, there are people who saved money, worked through school, and/or chose not to go to a four-year university who do not have student debt. Those are choices we’re all allowed to make because we’re treated equally under that law. However, according to President Biden to achieve “equity” in America, the people who did not save, did not work their way through school, and chose to take out loans to pay for college should not have student loan debt either. The equitable thing to do would be to force taxpayers to cover those costs, which he is trying to do. As you know that plan awaits a judgement by the Supreme Court.
The latest example of this from the White House is its mortgage equity plan. Many of you have undoubtably heard about this new rule. In short, the Biden Administration is putting forward a policy that forces homebuyers with good credit scores to subsidize the mortgage costs of people who do not have good credit scores. Borrowers with a credit score over 680 will pay roughly $40 more a month on a $400,000 loan or higher. That additional payment will go toward reducing payments from people with worse credit scores. For reference, the median credit score in America is 710, meaning this rule will be affecting most people with new mortgages.
The director of the Federal Housing Finance Agency (FHFA), the agency that regulates federal mortgage guarantors Fannie Mae and Freddie Mac, stated that this rule would “increase pricing support for purchase borrowers limited by income or by wealth.” In short, it’s the equitable thing to do. But credit scores exist for a reason, and recent history has shown the risk of people buying homes they cannot afford. A credit score is a reflection of a person’s ability to repay a loan based on borrowing history. It is important to note that credit scores are not tied to income or wealth. Anyone, no matter their salary, can achieve a good credit score. If you have paid your debts and made wise financial decisions you’ve earned a high credit score. You should not be punished with higher prices to make up for the people who have not made good decisions. Particularly given the risk a person faces when they’re led to believe they can afford a house they actually cannot.
The FHFA is under the jurisdiction of the Financial Services Committee. My colleagues on the committee and I are committed to fighting the Administration on what we believe to be a tax on creditworthy homebuyers. We have demanded that FHFA Director Sandra Thompson reverse course, and we are working on legislation to eliminate it. She has no authority to levy taxes without Congressional approval which is exactly what she and the President have done. In the name of equity, they are twisting the law to achieve a desired outcome. It is an extremely dangerous policy, and it is certainly not what our Founders meant by equal under God.