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House Republicans are crafting legislation to block a new Biden Administration rule that would penalize mortgage borrowers with good credit. The widely-criticized rule, due to go into effect as of May 1, would mean people with a good credit rating — above 680 — would pay higher fees connected to their mortgage. Those with lower credit scores would pay a lower rate.
Straight Arrow News contributor Larry Lindsey, a former Federal Reserve governor well-versed in credit scores, says the Biden mortgage rule punishes people who pay their bills to subsidize deadbeats who don’t pay theirs.
Credit-worthy people are now going to pay more. Deadbeats, people who don’t pay their credit cards back or live way beyond their means, will [sic] get subsidized by the responsible people who pay their debts. Now, this is bizarre, there’s no other word for it. The administration is not challenging the statistical premises of the credit-scoring tests, not at all. Those have been approved.
Well, the difference is $40 a month. That’s $14,000 over the life of a loan that a credit-worthy borrower is now going to have to pay. Not only do they have to pay more, but that raises the income threshold on which they [sic] qualify. Right now for a typical house, you need about $85,000 to $86,000. Now, you’re going to need about $90,000 of income to qualify for exactly the same mortgage if you happen to be credit worthy. Now, let’s think about the absurdities here.
First, there’s something we call moral hazard. It is simply wrong to punish the people who play by the rules and pay their bills back and subsidize the people who don’t pay their bills back. For the government to do that is quite perverse. Then, at a time when houses are becoming more and more unaffordable and out of reach, they’re squeezing out tens of thousands, probably several million people, who happen to be credit worthy from being able to qualify for a mortgage.
And finally, it simply defies logic. If you think credit scoring has a problem, and I will testify that it does, then what you should do is you should try and work on the problems. If something isn’t working, it isn’t fair, then the worst thing you can do is make it a more relevant criteria by throwing on this extra tax based on the criteria that you’re complaining about. It’s illogical.
Well, this all stems from a decision by President Biden when he came to office to end the typical cost-benefit of new regulations. Instead of [the] usual cost-benefit analysis, which is mathematically and statistically based, he put in a set of criteria that one could only define as “woke.” Decisions were supposed to be made on the racial and environmental justice that the regulation was trying to promote. Well, when you throw out math and you throw out statistics, and you go on to something that isn’t measurable, you’re going to be ending up approving some genuinely stupid and counterproductive ideas.
