Ready to Pay for Other People’s Bad Decisions? Mortgage Redistribution is Real, and It’s Here

Tinnakorn jorruang /
Tinnakorn jorruang /

In a repeat of the horrific economic policies that led to the 2008 housing market crash, Biden’s administration is once again enabling people who cannot afford loans to borrow money and buy houses that would ordinarily be beyond their financial reach.

But this time, he’s using the money of those who have worked hard to afford their homes to subsidize other people’s bad decisions. In a “through the looking glass” decision, those with hard-earned good credit scores will pay higher mortgage rates while those with poor borrowing power will pay less.

It sounds like a dystopian regulation, but as of Monday, May 1, 2023, it was signed into existence with the blessings of Democratic leadership.

For those with credit scores of 680 or over, it could mean an extra $40 per month on a $400,000 mortgage or an estimated additional charge of $14k over the life of the loan. Richard Stern, the director of the Grover M. Hermann Center for the Federal Budget at The Heritage Foundation, noted to FOX News, “What credit scores are there for is to make a realistic assessment of peoples’ ability to take out credit and make good on the loan. It is utterly crucial for the entire financial system that that be as accurate as possible.”

Instead, Stern explains that the new rules will muddy the picture of borrowers’ ability to pay back their obligations. “The new rules will make it artificially seem as if people who have lower credit ratings are more creditworthy while those with higher ratings will look like they’re less creditworthy.”

“That is exactly what happened when it turned into the subprime mortgage crisis,” Stern said. “It’s creating a system where you can’t rely on the risk numbers, you can’t make any real predictions about what’s going on.”

This hit is even more unwelcome at a time when interest rates have climbed to 16-year highs following two years of failed economic policies from the White House.

For consumers who survived the 2008 housing bubble burst, the new policy echoes the decisions that fueled a devastating financial crisis. In short, enabling banks to take on high-risk loans ensures failure and another crash, and no amount of financial extortion from those who are credit-worthy will be able to stop the inevitable avalanche of defaults.

FHFA Director Sandra Thompson tried to reverse the spin of the new rule, stating the additional fees will not “represent pure decreases for high-risk borrowers or pure increases for low-risk borrowers.”

She further attempted to alleviate fears, explaining that the increased fees primarily target second mortgages and cash-out refinances. Indirectly, however, she is making the case that those with higher credit scores will be punished. Borrowers looking for second mortgages are held to higher income and credit score standards to qualify for loans.

She is glossing over the fact that those who save up more money for an initial downpayment will be charged increased fees while those who have saved nothing will be charged lower ones.

The new rules appeared as a feat-accompli by the Biden-appointed FHA director. Americans were unaware of the potential of such an ill-thought policy, much less that it would suddenly become the new rule seemingly overnight.

And it’s another example of Democrats punishing the rule-followers and rewarding the undeserving or, as it’s more commonly known, “socialism.”

It’s not enough that Americans are struggling to wrap their minds around paying for someone else’s student loans, having their constitutional right to bear arms dismantled because of the actions of the lawless, and paying for healthcare and other needs for millions of illegals.

Now they face punishment for fiscal responsibility, too.

Luckily, building great credit is hard, but tanking it is easy. Seeing how many people deliberately make reckless decisions that damage their credit scores to avoid these new rules will be interesting. Instead of disputing a negative mark, Americans will look for ways to add them to their reports.

Welcome to the new American Dream, Biden-style.