Ba(n)king Joe’s Upside Down Mortgage Policy

One of Team Biden’s more topsy-turvy policy decisions in the name of “equity” is a new rule making those with higher credit scores pay more in mortgage fees, thereby subsidizing those with weaker & riskier credit.

As the WSJ explained, beginning May 1 “home buyers with a good credit score over 680 will pay about $40 more each month on a $400K loan,” and more depending on the size of the loan. “Those who make down payments of 20% on their homes will pay the highest fees,” which will then be “used to subsidize higher-risk borrowers through lower fees.” CBS News notes “The changes will also make it more expensive for borrowers to refinance and to pull equity out of their homes to pay off consumer debt.”

Concluded the WSJ editorial board: “This is the socialization of risk & it flies against every rational economic model, while encouraging housing market dysfunction & putting taxpayers at risk for higher default rates. The 20% down payment is a financial discipline that encourages buyers to seek homes they can afford & it gives buyers skin in the borrowing game. No one wants to default on a mortgage when they could lose tens or hundreds of thousands of dollars in equity they’ve built in their homes.” Ah, yes, but shouldn’t “equity” mean we are all broke financially as well as in common sense?

Davd Soul